Investigating the impact of publicly announced information security breaches on organizational performance

Myung Ko, Kweku-Muata Osei-Bryson and Carlos Dorantes
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Myung Ko: University of Texas at San Antonio
Kweku-Muata Osei-Bryson: Virginia Commonwelath University
Carlos Dorantes: University of Texas at San Antonio

No 7, Working Papers from College of Business, University of Texas at San Antonio

Abstract: This paper examines the impact of information security breaches on organizational performance. Up to now, there are only a few previous studies that investigated the stock market reaction of security breaches over a few days from the announcement. Using a matched sample comparison group, we incestigated the impact of information security breaches on breached firms' performance over a period of four quarters from the public announcement and examined whether breached firms perform worse than before the breach or worse than their peer firms in the industry.The result of our study to counter to initial expectations, suggesting that for some of performance measures of the breached firm were better ag=fter the breach than for the corresponding pre-breach period and also the treatment outperformed their peer firms in the indistry for the most of performance measures. Thus, although the market value of the breached firm might drop temporarily as indicated in the previous event studies, it did not impact on its financial performance over the longer periods of time, at least, over four quarters as shown in our study. Our Study also includes some important implications for managers and stock market investors.

Keywords: Information security; impact; security breach; organizational performance (search for similar items in EconPapers)
JEL-codes: M15 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2007-02-05
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