Short selling surrounding data breach announcements

Heng Emily Wang, Qin Emma Wang and Wentao Wu

Finance Research Letters, 2022, vol. 47, issue PB

Abstract: This study examines whether short sellers detect firm-level data breaches. Using proprietary daily lending data and unique data breach announcements, we investigate whether short selling anticipates prior to corporate data breaches and how it behaves in time leading up to announcements. Using a unique experimental setting of data breaches, an abnormal level of short-selling costs around data breach announcements indicates that short sellers exploit prior knowledge of data breaches. On a cross-sectional basis, we find that short-selling activities strongly correlate with negative cumulative abnormal returns (CARs). Furthermore, we provide evidence that short-selling activities play a positive role in capital market.

Keywords: Informed knowledge; Short selling; Data breaches; Cumulative abnormal returns (CARs); Market quality; Price discovery (search for similar items in EconPapers)
JEL-codes: G14 K24 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:47:y:2022:i:pb:s1544612322000198

DOI: 10.1016/j.frl.2022.102690

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