Abstract

http://ssrn.com/abstract=2036897
 
 

References (16)



 
 

Footnotes (21)



 


 



The Effect of Data Breaches on Shareholder Wealth


Kevin Gatzlaff


Florida State University - Department of Risk Management/Insurance, Real Estate and Business Law

Kathleen A. McCullough


Florida State University - College of Business

Spring 2010

Risk Management and Insurance Review, Vol. 13, Issue 1, pp. 61-83, 2010

Abstract:     
Many companies face the risk of a data breach exposing stored personal information of customers and employees. The frequency of such incidents has been increasing over time and can result in significant costs for the affected firm. This article examines the stock market's assessment of the cost of data breaches at publicly traded companies in which personal information such as customer and/or employee data are exposed. Using event study methodology on a sample of 77 events between the beginning of 2004 and the end of 2006, we find that the overall effect of a data breach on shareholder wealth is negative and statistically significant. Based on a cross‐sectional analysis of the cumulative abnormal returns, we find a negative association between market reaction and firms that are less forthcoming about the details of the breach. We also find that firms with higher market‐to‐book ratios experience greater negative abnormal returns associated with a data breach. Further, we find that firm size and subsidiary status mitigate the negative effect of a data breach on the firm's stock price and that the negative market reaction to a data breach is more significant in the most recent time periods of the sample.

Number of Pages in PDF File: 23

Accepted Paper Series





Date posted: April 9, 2012  

Suggested Citation

Gatzlaff, Kevin and McCullough, Kathleen A., The Effect of Data Breaches on Shareholder Wealth (Spring 2010). Risk Management and Insurance Review, Vol. 13, Issue 1, pp. 61-83, 2010. Available at SSRN: http://ssrn.com/abstract=2036897 or http://dx.doi.org/10.1111/j.1540-6296.2010.01178.x

Contact Information

Kevin M. Gatzlaff (Contact Author)
Florida State University - Department of Risk Management/Insurance, Real Estate and Business Law ( email )
College of Business
Tallahassee, FL 32306
United States
Kathleen A. McCullough
Florida State University - College of Business ( email )
Department of Risk Management and Insurance
150 Rovetta Business Building
Tallahassee, FL 32306-1110
United States
850-644-8358 (Phone)
850-644-4077 (Fax)
Feedback to SSRN


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References:  16
Footnotes:  21

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