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

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Rosati, Pierangelo and Cummins, Mark and Deeney, Peter and Gogolin, Fabian and van der Werff, Lisa and Lynn, Theo (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 (https://doi.org/10.1016/j.irfa.2017.01.001)

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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.

ORCID iDs

Rosati, Pierangelo, Cummins, Mark ORCID logoORCID: https://orcid.org/0000-0002-3539-8843, Deeney, Peter, Gogolin, Fabian, van der Werff, Lisa and Lynn, Theo;
  • Item type:Article
    ID code:82359
    Dates:
    Date
    Event
    31 January 2017
    Published
    14 January 2017
    Published Online
    12 January 2017
    Accepted
    Notes:Publisher Copyright: © 2017 Elsevier Inc.
    Subjects:Social Sciences > Finance
    Department:Strathclyde Business School > Accounting and Finance
    Depositing user: Pure Administrator
    Date deposited:15 Sep 2022 09:32
    Last modified:18 Dec 2024 01:33
    URI:https://strathprints.strath.ac.uk/id/eprint/82359
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