Cybersecurity Risks and Bank Valuation of Deposit Money Banks (DMBs) in Nigeria

Abstract

This study investigated the relationship between cybersecurity risks and the market valuation of Nigerian DMBs over the period from 2015 to 2024. Using panel data analysis with Fixed and Random Effects regression models, the study examined the influence of four key cybersecurity risk variables: Number of Reported Cyber Incidents (NRCI), Fraud/Attempted Fraud Value (FAFV), Operational Risk Loss Ratio (ORLR), and Cybersecurity Expenditure (CSE) on the Market-to-Book Value Ratio (MBVR) of listed DMBs in Nigeria. The findings revealed that increased NRCI, FAFV, and ORLR had significant negative impacts on bank valuation, as they undermined investor confidence and market performance. In contrast, higher CSE positively influenced MBVR, suggesting that increased cybersecurity investments enhanced bank valuation. These results aligned with the Resource-Based View (RBV) theory, which emphasized the importance of managing resources like cybersecurity for gaining a competitive advantage, and the Stakeholder Theory, which stressed the need to maintain trust among all stakeholders to ensure financial stability and positive market performance. The study concluded that Nigerian DMBs should have prioritized investments in cybersecurity infrastructure, fraud prevention measures, and operational risk management to mitigate the adverse effects of cybersecurity risks and improve market valuation. The research contributed to the growing body of knowledge on the intersection of cybersecurity and financial performance (FP) in the banking sector, offering practical insights for policymakers, banking executives, and investors. The study provided recommendations for banks to improve their valuation by effectively addressing cybersecurity risks, thus supporting long-term financial growth and sustainability.

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