Data Security and Merger Waves

This study examines whether and how concerns about data security affects corporate decisions on mergers and acquisitions. Using the staggered adoption of a law across the U.S. states that mandates disclosure of data breaches, we find an increase (a decrease) in the intensity of firms being acquired after the adoption of the law in a state by acquirers from the states with (without) the law in place prior to the deal. Further channel tests suggest that the increase is contributed by the mitigation of data lemon problems, and the decrease is due to higher costs of data breach.

Keywords: Digital Economy; Data Security; Cybersecurity; Mergers and Acquisitions; Data Breach Notificaiton Law

JEL Classification: K20; L51; G34

Suggested Citation: Suggested Citation

Sun, Yuan and Wei, Lai and Xie, Wensi, Data Security and Merger Waves (February 2023). Available at SSRN: https://ssrn.com/abstract=3646227 or http://dx.doi.org/10.2139/ssrn.3646227