Examining the relationship between firm’s financial records and security vulnerabilities

• We examine the correlation between firm’s financial records and vulnerabilities.
• Financial records are significantly associated with the number of vulnerabilities.
• There is positive correlation between vulnerabilities and firm’s size and performance.
• Vulnerabilities and marketing expenditure are positively correlated.
• Vulnerabilities and R&D expenditure are negatively correlated.

Security vulnerabilities and breaches remain a major concern for firms as they cost billions of dollars in downtime, maintenance and disruptions. Although researchers in the fields of security and vulnerability prediction have made significant contributions, the number of vulnerabilities continues to increase. Contrary to existing vulnerability studies, this research examines vulnerabilities from a financial perspective. We explore whether firm’s financial records are associated with vulnerabilities. In particular, we examine the correlation between the number of vulnerabilities and each of firm’s size, financial performance, marketing and sales, and research and development expenditures. The empirical analysis of this study is based on data collected from 89 publicly traded technology firms over a 10-year period. Our results reveal that financial records are significantly associated with vulnerabilities. More specifically, our results show that as technology firms increase their marketing and sales expenditures, the number of vulnerabilities increases as well. Interestingly, the analysis shows that firms can counter this rise by increasing their spending on research and development. We also find a positive correlation between the number of vulnerabilities and each of firm’s size and performance.