Short Selling Surrounding Data Breach Announcements

41 Pages Posted: 9 Apr 2020 Last revised: 3 Dec 2020

See all articles by Heng Emily Wang

Heng Emily Wang

Oklahoma State University, Spears School of Business

Qin Emma Wang

Oklahoma State University - Tulsa

Wentao Wu

Clarkson University

Date Written: December 2, 2020

Abstract

This study examines whether short sellers detect firm-level data breaches. Using proprietary daily lending data and unique data breach announcements, we investigate whether short selling anticipates prior to corporate data breaches and how it behaves in time leading up to announcements. Using a unique experimental setting of data breaches, we document an abnormal level of short-selling costs when a fi rm announces a data breach. Second, the results of our event studies report signi cantly negative cumulative abnormal returns (CARs) around data breach announcements. On a cross-sectional basis, we fi nd that short-selling activities strongly correlate with CARs. Furthermore, we provide evidence that short-selling activities improve market quality and price discovery. Overall, our study provides strong evidence that short sellers exploit prior knowledge of data breaches and play a positive role in capital market.

Keywords: informed knowledge, short selling, data breaches, cumulative abnormal returns (CARs), market quality, price discovery

JEL Classification: G14, K24

Suggested Citation

Wang, Heng and Wang, Qin Emma and Wu, Wentao, Short Selling Surrounding Data Breach Announcements (December 2, 2020). Available at SSRN: https://ssrn.com/abstract=3554487 or http://dx.doi.org/10.2139/ssrn.3554487

Heng Wang (Contact Author)

Oklahoma State University, Spears School of Business ( email )

Stillwater, OK
United States

Qin Emma Wang

Oklahoma State University - Tulsa ( email )

Department of Finance
461 Business Building
Stillwater, OK 74078
United States
918-594-8394 (Phone)
918-594-8281 (Fax)

HOME PAGE: http://business.okstate.edu/directory/694480.html

Wentao Wu

Clarkson University ( email )

United States

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