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The effect of data breach announcements beyond the stock price: empirical evidence on market activity

Rosati, Pierangelo orcid logoORCID: 0000-0002-6070-0426, Cummins, Mark orcid logoORCID: 0000-0002-3539-8843, Deeney, Peter, Gogolin, Fabian, van der Werff, Lisa orcid logoORCID: 0000-0003-4529-4690 and Lynn, Theo orcid logoORCID: 0000-0001-9284-7580 (2017) The effect of data breach announcements beyond the stock price: empirical evidence on market activity. International Review of Financial Analysis, 49 . pp. 146-154. ISSN 1057-5219

Abstract
Extending the literature that has focused thus far on stock price impact, this study investigates the effect of data breach announcements on market activity, specifically through the response of the bid-ask spread and trading volume. We investigate data breach announcements as a potential source of asymmetric information and provide a new dimension to the ongoing debate on market efficiency. Adopting an event study methodology on a sample of 74 data breaches from 2005 to 2014, we find that data breach announcements have a positive short-term effect on both bid-ask spread and trading volume. The effect is only evidenced however on the day of the event, with market efficiency ensuring a quick return to normal market activity. No abnormal trading activity emerges before announcements, so there is no evidence in our study that these types of events are being exploited by informed market participants. The magnitude of event day effects is found to be more pronounced for large breaches, and when the breach involves lost devices.
Metadata
Item Type:Article (Published)
Refereed:Yes
Uncontrolled Keywords:Data Breach; Stock Market; Bid-Ask Spread; Trading Volume; Event Study
Subjects:Business > Finance
Computer Science > Information technology
DCU Faculties and Centres:Research Initiatives and Centres > Irish Centre for Cloud Computing and Commerce (IC4)
DCU Faculties and Schools > Faculty of Engineering and Computing > School of Computing
Publisher:Elsevier
Official URL:http://dx.doi.org/10.1016/j.irfa.2017.01.001
Copyright Information:© 2017 Published by Elsevier Inc.
Use License:This item is licensed under a Creative Commons Attribution-NonCommercial-Share Alike 3.0 License. View License
Funders:Irish Centre for Cloud Computing & Commerce
ID Code:21659
Deposited On:23 Jan 2017 11:49 by Pierangelo Rosati . Last Modified 21 Feb 2022 13:19
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