A new study by researchers, including at The University of Western Australia, has revealed how US data breach notification (DBN) laws are influencing the cost of private debt for companies.
The research, published in , investigated the effects of DBN laws, which mandate the disclosure of data breaches to protect consumers.
It shows the laws lead to an increase in the cost of borrowing for firms, as lenders adjust their risk assessments to account for potential future costs from breach disclosures, such as litigation expenses.
Lead author Nishant Agarwal, a lecturer at UWA’s Business School, said the research showed lenders were taking into consideration heightened risks associated with potential data breaches when determining borrowing costs for firms.
“This results in higher costs of private debt for companies affected by the laws,” Mr Agarwal said.
“However, our research also revealed good news in that firms investing in robust cybersecurity measures can mitigate the increased costs.
“Companies with strong cybersecurity infrastructure and technology leadership in their top management are viewed more favourably by lenders, leading to more favourable borrowing terms.”
