“Under the Radar”: The Impact of Relaxed Institutional Shareholder Monitoring on Firms
Prof. Qian WANG
Assistant Professor in Business Intelligence and Data Analytics
FBA, UM
Date: 4 March 2025 (Tuesday)
Time: 13:00 to 14:00
Venue: FBA Lobby
Abstract
Whereas extant cybersecurity research has often considered the influences of managers and employees on firms’ cybersecurity management, our study takes a different approach by examining the role of institutional shareholders. Using unique annual data from U.S. firms, we find that relaxed monitoring by institutional shareholders increases the likelihood of data breaches and exacerbates negative market reactions following such incidents. These findings underscore the importance of institutional shareholder monitoring in both preventing and recovering from data breaches. To address endogeneity concerns, we construct a shareholder monitoring relaxation variable using exogenous shocks from unrelated industries in their portfolio; these shocks temporarily shift institutional shareholders’ attention away from the focal firm, resulting in a relaxation of their monitoring efforts. Furthermore, we explore how performance incentives provided to managers moderate the impact of relaxed shareholder monitoring. Our findings reveal that when managers are incentivized to align their interests with those of institutional shareholders, the detrimental effects of relaxed monitoring are attenuated. Additionally, we find that managerial expertise in information technology is a contextual factor that mitigates the adverse effects of relaxed institutional shareholder monitoring. In summary, our study unveils the significance of institutional shareholders as focal external stakeholders that can influence a firm’s performance in cybersecurity management.
Speaker
Qian WANG is an assistant professor at the Faculty of Business Administration, University of Macau. Her research interests include data breaches, corporate governance, and information security. Her work has appeared in several international journals, such as Journal of the Association for Information Systems, Journal of Operations Management, Production and Operations Management, and Journal of Management Information Systems.
All are welcome!
