Song, Victor, Hasan Cavusoglu, Jaecheol Park, Mary L. Z. Ma, Gene Moo Lee (2026) “IT Risk and Stock Price Crash Risk,” Under review.

• Presented at UBC Cybersecurity 2018 (Vancouver, BC) and HICSS 2020 (Maui, HI)
• Based on Victor Song’s Master’s Thesis and HICSS 2020 Paper

This study examines whether and how firm-level information technology (IT) risk contributes to stock price crash risk. We construct a novel measure of ex-ante IT risk from risk factor disclosures in Item 1A of firms’ 10-K filings using advanced machine learning approaches. We find that higher IT risk is associated with greater stock price crash risk. Mechanism analyses indicate that this effect operates primarily through increased downside operating risk, rather than through heightened exposure to data breach events. We further document heterogeneity in the relationship between IT risk and stock price crash risk: (1) cybersecurity risk has a stronger effect than noncybersecurity IT risk; (2) the effect is stronger for newly disclosed IT risk factors; and (3) higher readability amplifies the crash risk effect. Together, these findings highlight IT risk as a previously underexplored determinant of stock price crash risk and offer new insights into the capital market consequences of firms’ IT-related disclosures.