CyberSecurity Risk and M&A Transactions: An Empirical Investigation.

Using text-based measures of cybersecurity risk, we document that low cybersecurity risk firms are more likely to initiate or be targeted for an M&A transaction. Further, we show that the market has recently started to price cybersecurity risk at the time of a deal announcement and – consistent with this finding - attempted mergers are significantly less likely to fail if the selected target has a low cybersecurity risk profile. Cyber risk is finally reflected in merger premium, which appears to be systematically higher for mergers where the acquirer exhibits low cybersecurity risk levels. These findings offer novel evidence on the economic impact of cybersecurity risk on the market for corporate control.