Trade secrets and cyber security breaches
We study the association between firms’ disclosures in Forms 10-K of the existence of trade secrets, and cyber theft of corporate data (which we refer to as “Breaches”). Prior academic research explaining occurrence of Breaches is scarce, and no prior study has focused specifically on Breaches that likely target trade secrets. We provide such evidence, and our use of Form 10-K contents related to trade secrets is a first step toward determining whether corporations actually attract Breach activity through their public disclosures. We find that firms mentioning the existence of trade secrets have a significantly higher subsequent probability of being Breached relative to firms that do not do so. Our results are stronger among younger firms, firms with fewer employees, and firms operating in less concentrated industries. By conducting a battery of additional tests, we attempt to go beyond merely establishing correlations to provide evidence whether such proprietary information can actually attract cyber attacks. Specifically, our results are robust to additional control variables, an instrumental variable approach, firm fixed effects, and a propensity score matching technique.
|Persistent URL||dx.doi.org/10.1016/j.jaccpubpol.2018.10.006, hdl.handle.net/1765/130090|
|Journal||Journal of Accounting and Public Policy|
Ettredge, M., Guo, F., & Li, Y. (2018). Trade secrets and cyber security breaches. Journal of Accounting and Public Policy, 37(6), 564–585. doi:10.1016/j.jaccpubpol.2018.10.006