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March 5, 2026Journal of Accounting Literature0 citations

A stitch in time saves nine: Does cybersecurity legislation decrease debt default risk?

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DWDuo WangYLYanxi Li

Key Points

  • This research aims to explore how cybersecurity legislation influences corporate debt default risk.
  • Utilized the Differences-in-Differences method for analysis
  • Sample included listed firms in China from 2011 to 2022
  • Investigated the effects of China's Cybersecurity Law on corporate debt risk
  • Cybersecurity legislation effectively reduces debt default risk
  • Risk mitigation achieved by lowering operational risks and alleviating financing constraints
  • Stronger impact noted in non-state-owned firms with weaker governance

Abstract

Purpose The purpose of this paper is to examine the influence of cybersecurity legislation on corporate debt default risk and its underlying mechanism. Design/methodology/approach This study investigates the potential of China's Cybersecurity Law (CSL) to affect corporate debt default risk using the Differences-in-Differences method with the sample of listed firms in China from 2011 to 2022. Findings (1) CSL effectively mitigates debt default risk. (2) CSL significantly decreases debt default risk by reducing operational risk, alleviating financing constraints and agency costs. (3) Firms that are not state-owned and have weaker internal governance and external supervision exhibit a strengthened negative association between CSL and debt default risk. Practical implications This paper validates the impact of CSL on corporate debt default risk. In addition, it is recommended that corporate managers should continuously strengthen cybersecurity awareness and response capabilities to effectively mitigate corporate debt default risks. For investors, it is imperative to accord significant attention to the cybersecurity risks of firms during the investment process. And for policymakers, it underscores the necessity to develop and refine corporate cybersecurity institutional standards and frameworks governing corporate information security. Originality/value This study demonstrates cybersecurity's risk-mitigation capacity in emerging market debt markets and advances the debt default risk literature by identifying cybersecurity regulation as an underexplored determinant. In addition, this study provides implications for strengthening corporate managers' cybersecurity awareness and enhancing the implementation and refinement of cybersecurity regulations.

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Cite This Study

Wang et al. (2026) studied this question.

synapsesocial.com/papers/69a91da8d6127c7a504c0ad0https://doi.org/10.1108/jal-06-2025-0311
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Also Consider

Synapse has enriched 5 closely related papers on similar clinical questions. Consider them for comparative context:

  1. 1Financial Ratios, Discriminant Analysis and the Prediction of Corporate Bankruptcy1968 · 3,762 citations
  2. 2The Default Risk of Swaps1991 · 164 citations
  3. 3Do firms underreport information on cyber-attacks? Evidence from capital markets2018 · 296 citations
  4. 4The power of technology: FinTech and corporate debt default risk in China2023 · 62 citations
  5. 5The power of credit: can the implementation of a social credit system reduce the risk of corporate debt default?2025 · 10 citations