State and local governments are attractive cybercrime targets because of inadequate cybersecurity and ample access to sensitive information. We show that external data breaches translate to higher financing costs for governments, including negative abnormal bond returns in the secondary market and higher offering yields and bond pricing uncertainty in the primary market. We also find that governments increase total spending around cyberattacks, suggesting higher operating costs as the likely channel behind the spike in financing costs. Exploiting state-level variation in the timing of both breach notification and data security laws, we show that they have not significantly strengthened cybersecurity.


Trade secret theft, and more broadly intellectual property (IP) theft, have resurfaced to the public attention amid the U.S.-China geopolitical conflict. In this paper, we document the detrimental effects of IP theft on innovation at the targeted firms whose trade secrets are stolen. Following the theft, targeted firms display a persistent drop in innovation outcomes, including the number of patents, patent value, and patent impact. These firms experience a decline in profitability, indicating that IP theft hurts their economic prospects. Importantly, the adverse effects of trade secret theft also spill over to the business partners of the targeted firms.


Using supervisory data from large U.S. bank holding companies (BHCs), we document that BHCs suffer more operational losses during episodes of extreme storms. Among different operational loss types, losses due to external fraud, BHCs' failure to meet obligations to clients and faulty business practices, damage to physical assets, and business disruption drive this relation. Event study estimations corroborate our baseline findings. We further show that BHCs with past exposure to extreme storms reduce operational losses from future exposure to storms. Overall, our findings provide new evidence regarding U.S. banking organizations' exposure to climate risks with implications for risk management practices and supervisory policy.


The failure of Silicon Valley Bank (SVB) brought renewed attention to the risk to financial institutions of runs on their deposits. In this paper, we propose a framework to determine whether conditions exist for banks to experience runs. We compare the performance of our method with several alternative measures of bank fragility. Our measure is able to identify weak banks earlier and as accurately as any of the alternatives, and at much lower cost in terms of falsely identifying banks as weak. The results indicate that this metric could be used to help banks effectively manage their balance sheets to avoid creating conditions where depositors have an incentive to run.


The stock market typically reacts negatively to the announcements of operational losses at U.S. financial institutions. We find significant evidence of opportunistic insider trading, with insiders saving an average of $67,357 through timely selling in the two months before the announcement of an operational loss. The results are concentrated among top executives and directors. Opportunistic behavior is muted for insiders with legal expertise. The results have implications for the U.S. Security and Exchange Commission’s goal of tightening restrictions on insider trading in an environment of intensifying operational risks from cyber threats and new financial technologies.


We examine the heterogeneity in bank examiner practices and its potential impact on the US banking sector. Our findings reveal that examiners vary in their access to private information and relative stringency, with their risk tolerance shifting in response to crises. We explore how this examiner heterogeneity influences bank holding company ratings. Our analysis demonstrates that the "examiner-specific effect" on ratings has significant implications for bank holding company risk-taking and investment decisions. We observe that stricter examinations are associated with reduced risk-taking in bank holding companies, but this is coupled with slower growth rates.


We provide systematic evidence that market volatility is a significant driver of bank operational risk losses. Using a daily panel of over 600,000 operational loss events at 49 U.S. bank holding companies, we estimate panel regressions with stringent BHC-month fixed effects, exploiting the plausible exogeneity of aggregate volatility to any individual bank. A one-standard-deviation increase in the VIX raises expected operational losses by roughly 7%, over $1 billion per year across these institutions, with moderately large losses rising disproportionately. Losses concentrate in execution and processing errors and in system failures, consistent with two channels: human error under stress and strained risk-management systems. The relationship is stronger for smaller, fast-growing, and weakly risk-managed banks, informing stress testing and supervisory monitoring.


We study how remote work affects Bank Holding Company (BHC) efficiency in the U.S. in the pandemic and post-pandemic period. We measure BHC exposure through the work-from-home rate of finance-industry workers in its pre-pandemic markets, separating this staff channel from the local incidence of remote work. Greater staff exposure improves cost efficiency and reduces revenue efficiency with a roughly one-year delay, leaving profit efficiency essentially unchanged, though returns to shareholders tilt modestly positive as the cost savings dominate. Cost gains are concentrated in banks with large physical and technological footprints; revenue losses are concentrated in relationship-intensive banks. Our findings suggest that remote work shifts the composition of bank production, with implications for bank management and supervision.