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

Pierangelo Rosati, Mark Cummins, Peter Deeney, Fabian Gogolin, Lisa van der Werff and Theo Lynn

International Review of Financial Analysis, 2017, vol. 49, issue C, 146-154

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.

Keywords: Data breach; Stock market; Bid-ask spread; Trading volume; Event study (search for similar items in EconPapers)
JEL-codes: G12 G14 O30 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:49:y:2017:i:c:p:146-154

DOI: 10.1016/j.irfa.2017.01.001

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