Strategic News Bundling and Privacy Breach Disclosures

41 Pages Posted: 22 May 2015 Last revised: 14 Nov 2015

Multiple version iconThere are 2 versions of this paper

Date Written: June 25, 2015


I examine how firms strategically bundle news reports to offset the negative effects of a privacy breach disclosure. Using a complete dataset of privacy breaches from 2005 to 2014, I find that firms experience a small and significant 0.27% decrease in their stock price on average following the breaking news disclosure of the privacy breach. But controlling for media coverage, this small decline is offset by an increase in the effect of a larger than usual number of positive news reports released by the firm on that day, which could increase the returns by 0.47% for every additional positive news report compared to their usual media coverage. I further find that disclosure laws have a significant and negative effect on the returns, even when news releases are used to alleviate the decrease. Moreover, a portfolio constructed with breached firms controlling for state disclosure laws outperforms the market over the 2007-2014 period, especially in the case of breached firms in mandatory disclosure states.

Keywords: News Events, Media, Information, Market Efficiency, Security breaches, Event Study, Risk analysis, Information Breach, Privacy, Market Valuation

JEL Classification: D18, G10, G12, G14, G17, G30, K13, K20, L51, L86

Suggested Citation

Gay, Sebastien, Strategic News Bundling and Privacy Breach Disclosures (June 25, 2015). Becker Friedman Institute for Research in Economics Working Paper No. 2015-11, Available at SSRN: or

Sebastien Gay (Contact Author)

The University of Chicago ( email )

Department of Economics
1126 East 59th Street
Chicago, IL 60637
United States
773-834-0887 (Phone)


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