Cyber-attacks and stock market activity |
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| Affiliation: | 1. Department of Finance, Spears School of Business, Oklahoma State University, USA;2. Department of Business Analytics, Finance and Marketing, Madden School of Business, Le Moyne College, USA;1. Economics & Finance Department, Gulf University for Science & Technology, Kuwait;2. Paris School of Business, Paris, France;1. Department of Business Analytics, Finance and Marketing, Madden School of Business, Le Moyne College, 1419 Salt Springs Rd, Syracuse, New York 13214, United States;2. Department of Finance, Spears School of Business, Oklahoma State University, Tulsa, Oklahoma 74106, United States;3. David D. Reh School of Business, Clarkson University, 8 Clarkson Ave, Potsdam, New York 13699, United States |
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| Abstract: | I study how financial markets react to unexpected corporate security breaches in the short and the long-term. The main results show that daily excess returns drop, trading volume increases due to selling pressure, and liquidity improves upon the public disclosure of first-time corporate hacking events. The evidence from the search frequency in Google suggests that such short-lived market reaction is due to increasing investors' attention. Cyber-attacks affect firms' policies in the long run, up to five years after the security breach announcement. These results are consistent with the hypothesis that security breaches represent unexpected negative shocks to firms' reputations. |
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