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<p>The knowledge-based era when information is power urges firms to quickly converge to the global digitalization process to hone their data utilization, though the convergence sometimes induces hasty implementations that render firms vulnerable to cybercrimes. This study examines how firm-level cybersecurity risk influences corporate dividend policy with a sample of US-listed firms from 2007 to 2018. By employing the fixed-effect estimator, I reveal a negative impact of firm-level cybersecurity risk on corporate dividend policy. The finding holds with different model specifications, alternative measures of dividends, and endogeneity diagnoses, namely the two-stage least-squares and entropy balancing for continuous treatments. This impact is found to be channelled through free cash flows, managers’ preference for a quiet life, and corporate unaccountability. However, this impact is weakened if firms are financially constrained or have diligent boards. The finding of this study indicates that managers consider shareholders having shared financial responsibility regarding firms’ cybersecurity improvement and offers some implications from the corporate governance and sustainability viewpoints for investors to safeguard their benefits in the knowledge-led economy.</p>

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Who Pays for Cybersecurity? Corporate Dividends in Response to Cybersecurity Risk in US Firms

  • 期刊论文

  • 发表日期：

    2025年2月12日

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  • Huy Viet Hoang

摘要

The knowledge-based era when information is power urges firms to quickly converge to the global digitalization process to hone their data utilization, though the convergence sometimes induces hasty implementations that render firms vulnerable to cybercrimes. This study examines how firm-level cybersecurity risk influences corporate dividend policy with a sample of US-listed firms from 2007 to 2018. By employing the fixed-effect estimator, I reveal a negative impact of firm-level cybersecurity risk on corporate dividend policy. The finding holds with different model specifications, alternative measures of dividends, and endogeneity diagnoses, namely the two-stage least-squares and entropy balancing for continuous treatments. This impact is found to be channelled through free cash flows, managers’ preference for a quiet life, and corporate unaccountability. However, this impact is weakened if firms are financially constrained or have diligent boards. The finding of this study indicates that managers consider shareholders having shared financial responsibility regarding firms’ cybersecurity improvement and offers some implications from the corporate governance and sustainability viewpoints for investors to safeguard their benefits in the knowledge-led economy.