MIS Distinguished Speaker Series

Temple University

Fox School of Business
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Cybersecurity Risk

Jan 14 – Yiwen Gao to present “Biding Their Time: The Influences of Executive Compensation and Board Cybersecurity Intensity on Firms’ Strategic SEC Data Breach Notification Delays”

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Biding Their Time: The Influences of Executive Compensation and Board Cybersecurity Intensity on Firms’ Strategic SEC Data Breach Notification Delays

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Yiwen Gao

Ph.D. Student
Management Information Systems
Fox School of Business
Temple University

Friday, Jan 14

11:00 am – 12:30 pm | Zoom

Abstact:

The U.S. Securities and Exchange Commission (SEC) requires firms to notify investors in an SEC filing of a data breach if it constitutes a material event. Importantly, the determination of materiality lies with executives, which has resulted in firms failing to disclose breaches to the SEC or purposely delaying notifications. We draw from the behavioral theory of the firm and executive compensation literature to develop predictions about the influence of IT and non-IT executives’ compensation on firms’ SEC data breach notification delays. Given the possibility of competing priorities and goals of the two executive groups, we argue that increased IT executive compensation leads to fewer delays, whereas increased non- IT executive compensation has the opposite effect. Because corporate boards of directors have oversight and advise on firms’ cybersecurity matters, we argue that the cybersecurity intensity of the firm’s board (i.e., social ties to breached firms) moderates the relationships between IT and non-IT executive compensation and notification delays. To test our hypotheses, we constructed a panel dataset from public sources and performed a series of econometric analyses. Our results suggest that the influence of executive compensation on notification delays differs for IT and non-IT executives in the manner hypothesized. However, for both types of executives, the moderating influence of the board’s cybersecurity intensity works to increase notification delays. Counter to the conventional view that increased cybersecurity experience on the board benefits timely data breach notification, our findings suggest that greater board experience results in delays of timely communications about data breaches via 8-K filings.

Feb 26 – Hasan Cavusoglu to present “IT Risk and Firm Propensity to Stock Price Crash”

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IT Risk and Firm Propensity to Stock Price Crash

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Hasan Cavusoglu

Associate Professor of MIS
Accounting and Information Systems Division
Sauder School of Business
University of British Columbia

Friday, Feb 26

1 – 2 pm | Zoom

(send an email to ayabakan@temple.edu to get the Zoom link)

Abstact:

As firms increasingly depend on Information Technology (IT) in their business strategies and value creation activities, risks associated with IT have become one of the top concerns for managers and investors. This study examines the relation between IT-related risk factor information in Item 1A of the 10-K annual reports and a firm’s stock price crash risk, a firm specific propensity to stock price crashes. Using the text-mining approach of Latent Dirichlet Allocation topic modeling to identify IT-related risk factors, we find that IT risk emerges as one of firms’ key risk categories and that IT risk factors are positively associated with a firm’s future stock price crash risk. We further separate IT risk factors into cybersecurity risk that potentially leads to a loss or leak of data, and IT value risk that relates to a firm’s reliance on IT for its competitive advantage and value creation activities. We find that cybersecurity risk continues to affect crash risk, but IT value risk does not, consistent with their different risk nature. We also find that the readability, novelty, and the order of appearance of the IT risk factor information in Item 1A enhance the information content of IT risk factors and strengthen their relation with stock price crash risk.