The effect of cyberattacks on European financial institutions: an event study approach

openCyber risk has been a widely debated issue in recent years. The financial world could prove particularly vulnerable when it comes to cyberattacks, given the high level of interconnection between all of the sector’s players. This paper uses the event study methodology to assess the reaction of 15 European financial institutions’ share prices to direct cyberattacks. The same methodology is used for testing the reaction of a sample of 22 financial institutions, based in the Eurozone, to a series of systemic cyberattacks with potential worldwide repercussions. Our research represents an original contribution to the literature in two ways. Firstly, to the best of our knowledge, no authors have previously applied the event study methodology to a sample of shares pertaining exclusively to financial institutions. Even less so to financial institutions exclusively based in the Eurozone. Secondly, to the best of our knowledge, no existing research applied our subdivision between direct and systemic cybersecurity events in a single study. Overall, our study provides empirical evidence on the effect of 14 direct and 3 systemic cyberattacks. These attacks were announced by newspapers between October 2014 and August 2023. This represents an opportunity to update the results of the older event study cybersecurity literature, as well as an opportunity to test the results by more recent studies. The results can also be useful in the interpretation and anticipation of current and future European legislation on cybersecurity. In the case of direct cyberattacks, which explicitly target banks, insurance companies or electronic money institutions, we find that stock prices exhibit negative and significant cumulative abnormal returns. Furthermore, these negative effects become more relevant when considering larger event windows after the attack date. We also divide, in accordance with other studies, direct events between ones that compromise the confidentiality of information and ones that do not. We interestingly find that attacks that do not reveal confidential information have a significant negative effect on their targets. Conversely, cyberattacks that do reveal confidential information held by financial institutions do not have a significant effect on stock prices. Regarding the three systemic events, we find contrasting but interesting results. The breach of a major US bank has an overall negative and significant effect on European companies, in particular the ones based in Italy and Spain. On the other hand, when SolarWinds was discovered to be the vector of a cyberattack on the US Government, no such negative effect was observed. Lastly in the case of the WannaCry ransomware epidemic, we find empirical evidence of negative abnormal returns only for companies based in Germany and Spain.Cyber risk has been a widely debated issue in recent years. The financial world could prove particularly vulnerable when it comes to cyberattacks, given the high level of interconnection between all of the sector’s players. This paper uses the event study methodology to assess the reaction of 15 European financial institutions’ share prices to direct cyberattacks. The same methodology is used for testing the reaction of a sample of 22 financial institutions, based in the Eurozone, to a series of systemic cyberattacks with potential worldwide repercussions. Our research represents an original contribution to the literature in two ways. Firstly, to the best of our knowledge, no authors have previously applied the event study methodology to a sample of shares pertaining exclusively to financial institutions. Even less so to financial institutions exclusively based in the Eurozone. Secondly, to the best of our knowledge, no existing research applied our subdivision between direct and systemic cybersecurity events in a single study. Overall, our study provides empirical evidence on the effect of 14 direct and 3 systemic cyberattacks. These attacks were announced by newspapers between October 2014 and August 2023. This represents an opportunity to update the results of the older event study cybersecurity literature, as well as an opportunity to test the results by more recent studies. The results can also be useful in the interpretation and anticipation of current and future European legislation on cybersecurity. In the case of direct cyberattacks, which explicitly target banks, insurance companies or electronic money institutions, we find that stock prices exhibit negative and significant cumulative abnormal returns. Furthermore, these negative effects become more relevant when considering larger event windows after the attack date. We also divide, in accordance with other studies, direct events between ones that compromise the confidentiality of information and ones that do not. We interestingly find that attacks that do not reveal confidential information have a significant negative effect on their targets. Conversely, cyberattacks that do reveal confidential information held by financial institutions do not have a significant effect on stock prices. Regarding the three systemic events, we find contrasting but interesting results. The breach of a major US bank has an overall negative and significant effect on European companies, in particular the ones based in Italy and Spain. On the other hand, when SolarWinds was discovered to be the vector of a cyberattack on the US Government, no such negative effect was observed. Lastly in the case of the WannaCry ransomware epidemic, we find empirical evidence of negative abnormal returns only for companies based in Germany and Spain