Hacking Corporate Reputations

37 Pages Posted: 19 Mar 2018  

Pat Akey

University of Toronto - Rotman School of Management

Stefan Lewellen

Pennsylvania State University; London Business School

Inessa Liskovich

University of Texas at Austin - Department of Finance

Date Written: March 16, 2018

Abstract

We exploit unexpected corporate data breaches to study how firms respond to negative reputation events. Data breaches negatively affect firm value by 10-20% following the event, and this effect lasts for years. However, consistent with a decline in corporate reputation reducing the value of a firm's pre-existing corporate social responsibility (CSR) investments, we find that firms significantly increase their investment in CSR by an average of 0.4-0.5 standard deviations in the years following an unexpected breach. Our paper represents the first empirical study to directly link CSR to corporate reputations and presents the first evidence in the literature that firms actively invest in CSR as the result of a negative reputation shock.

Keywords: Corporate Social Responsibility, CSR, Corporate Reputation, Cyberattack, Data Breach

JEL Classification: G32, G31, G14, M14, D22, D23, L21, L25, G38, G39

Suggested Citation

Akey, Pat and Lewellen, Stefan and Liskovich, Inessa, Hacking Corporate Reputations (March 16, 2018). Rotman School of Management Working Paper No. 3143740. Available at SSRN: https://ssrn.com/abstract=3143740 or http://dx.doi.org/10.2139/ssrn.3143740

Pat Akey

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

Stefan Lewellen (Contact Author)

Pennsylvania State University ( email )

360 Business Building
University Park, PA 16802
United States

London Business School ( email )

Sussex Place
Regent's Park
London, London NW1 4SA
United Kingdom

Inessa Liskovich

University of Texas at Austin - Department of Finance ( email )

Red McCombs School of Business
Austin, TX 78712
United States

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