Research

This paper quantifies the impact of violent crime on municipal borrowing costs. Our findings reveal that higher violent crime rates significantly increase yields, spreads, and adjusted spreads. Using changes in local district attorney political party as a novel identification strategy, we show these shifts lead to increased violent crime and higher borrowing costs. This effect is concentrated in switches from Republican to Democrat, reflecting market perceptions of Democratic district attorneys as more lenient on crime. These switches also result in credit rating downgrades, reduced sales and property taxes, and increased emigration of high-net-worth individuals. Our findings underscore the significant yet previously unexplored cost of crime on public financing.

I examine the costs and real effects of medical data breaches using a stacked difference-in-differences research design. I find that data breaches increase the cost of healthcare financing and examine three mechanisms that link breaches to increased costs. While data breaches increase issuer credit risk on average, only hacks – the worst events – harm both hospital and patient health. Yet, investors do not require an incremental premium for bonds of hacked issuers. I find evidence this mispricing is further influenced by levels of investor attention. Altogether, my results suggest that investors do not appropriately price the affected securities.

I examine the costs and real effects of cyberattacks on U.S. counties using a stacked difference-in-differences research design. I find that data breaches increase the cost of municipal government debt, and I identify three mechanisms that link cyberattacks to increased costs. First, breaches increase a county’s cash flow risk via significant decreases across several cash flow accounts. Additionally, breaches increase a county’s credit risk and lead it to make budget cuts to social programs, which increases reputation risk. Overall, cyberattacks adversely affect municipal financing and influence counties to take actions that may lead to less-desirable future social and economic outcomes.

I examine how cyberattacks affect the wealth, operational performance, and business strategies of non-targeted joint venture/strategic alliance partners, suppliers, and customers. Cyberattacks are associated with large losses in stakeholder value around attack announcements. Contrary to expectations, I find that, on average, cyberattacks do not tend to adversely affect stakeholder firms over the long term. Instead, managers appear to make temporary changes that help protect their firms from potentially adverse spillovers that they later reverse. However, responses vary based on the nature of information lost from the attack and the potential damage the events may inflict on the stakeholder relationship with the target. Lastly, suppliers are more likely to retain their relationship with targeted customers post-attack, and this effect is potentially driven by their reliance on relationship-specific investments. In contrast, other stakeholders do not make adjustments to their supply chains.