Data breach disclosures and stock price crash risk: Evidence from data breach notification laws

Hung Cao, Hieu V. Phan and Sabatino Silveri

International Review of Financial Analysis, 2024, vol. 93, issue C

Abstract: Exploiting the staggered adoption of data breach notification (DBN) laws, which obligate firms to disclose data breaches when they occur, as an exogenous shock to data breach disclosures, we find that the adoption of these laws leads to higher future stock price crash risk. The positive relation between DBN laws and crash risk is more pronounced for firms with weaker corporate governance, higher financial constraints, and higher information asymmetry. Our findings suggest that investors' concerns about the consequences of data breaches and the vulnerability of breached firms' data security heighten stock price crash risk.

Keywords: Data security; Data breaches; Disclosure; Stock price crash risk; Bad news hoarding (search for similar items in EconPapers)
JEL-codes: G10 G30 G38 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:93:y:2024:i:c:s1057521924000966

DOI: 10.1016/j.irfa.2024.103164

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