Cyber Attacks and Stock Market Activity
39 Pages Posted: 5 Jun 2018 Last revised: 30 Aug 2018
Date Written: June 4, 2018
We study how financial markets react to unexpected corporate security breaches both in the short- and in the long-term. The main results show that daily excess returns drop, trading volume increases, and liquidity deteriorates upon the public disclosure of first-time corporate hacking events. The evidence suggests that trading volume increases due to selling pressure. In addition, the empirical analysis demonstrates that security breaches affect firms' policies in the long-run, up to five years after the public announcement of a security breach. These results are consistent with the hypothesis that security breaches represent unexpected negative shocks to firms' reputation, which lead investors to react regardless of the economic fundamentals.
Keywords: Security Breaches, Hacking, Stock Returns, Trading Volume, Market Liquidity.
JEL Classification: G14, G32, G11
Suggested Citation: Suggested Citation