The Effect of Data Breach Announcements Beyond The Stock Price: Empirical Evidence on Market Activity

Pierangelo Rosati, Mark Cummins, Peter Deeney, Fabian Gogolin, Lisa Van der Werff, Theo Lynn

Research output: Contribution to journalArticle

8 Citations (Scopus)
463 Downloads (Pure)

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.
Original languageEnglish
JournalInternational Review of Financial Analysis
Early online date14 Jan 2017
DOIs
Publication statusEarly online date - 14 Jan 2017

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