How to reduce the cybersecurity breach contagion effect

Abstract

This article discusses a recent study titled ‘‘Do voluntary disclosures mitigate the cybersecurity beach contagion effect?’’ (Kelton and Pennington 2020). The study finds voluntary cybersecurity disclosures can provide firms protection from contagion effects, a phenomenon where the negative impact of a cybersecurity breach at an industry peer firm spills over to other bystander firms in the same industry. This article offers practical implications of the study for financial reporting executives, boards of directors, and auditors.