Reaction of Stock Volatility to Data Breach: an Event Study

Keywords: Cybersecurity, Stock Volatility, Data Breach, Time-Varying Volatility, Event Study Methodology


The paper assesses how stock market volatility reacts to data breach disclosure. The paper applies Volatility Event Analysis and Kolmogorov-Smirnov Test to analyse how equity risk (stock volatility) of 96 firms listed on the S&P 500 index reacted to the announcement of a data breach using records from Breach Level Index (BLI ) over the period between January 2013 and December 2018. Two levels of empirical analysis were performed: cross-section level and industry level. We employ statistical tests that adjust for the effects of cross-section firm-specific mean and volatility. The analysis delivers the following results: Firstly, cross-sectional analysis shows that there is evidence of significant abnormal across the firms and significant difference between before and after cyberattacks announcements. Secondly, the industry level analysis reveals that the firms in the financial industry exhibit more abnormal volatility and returns than firms in other sectors. Additionally, there is significant evidence of the difference in pre and post cyberattacks or data breach announcements, however, this effect tends to be more pronounced after the announcement of a data breach. Implying that data breach announcements can significantly influence equity volatility. In conclusion, the paper posits, equity investors and other stakeholders should reconsider their approach to cybersecurity events when updating the risk measures of their stocks and portfolios.


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Author Biographies

Samuel Tweneboah-Koduah, Ghana Institute of Management and Public Administration, Accra, Ghana

Samuel Tweneboah-Koduah, PhD is a full-time Lecturer at the Computer Science Dept. School of Technology, GIMPA, Accra, Ghana. Samuel has also been a visiting Lecturer to the Centre of Media and Information Technology, Aalborg University, Copenhagen, Denmark, a visiting Scholar to the University of Washington, Seattle and Northern Kentucky University USA. He has a number of peer-reviewed journal publications to his credit and has presented a couple of papers at international conferences. As a lecturer and a scholar, Samuel has been involved in a number of projects, both at national and international levels. Currently, he is the Ministry of Health (Ghana) appointed Governing Chairperson of Twifu-Praso Nursing and Midwifery Training College. Samuel’s research interest is in the areas of Cybersecurity and Risk Assurance, Digital Forensics, Technology Innovation and Application, Data Mining, Cloud Computing, Internet of Things, Wireless and Mobile Networks.

Francis Atsu, Dept. of Accounting and Finance, GIMPA, Accra, Ghana

Francis Atsu is a consultant for the Ministry of Finance on Basel Accords under the Ghana Economic Management Strengthening Technical Assistance (GEMS-TA) project funded by the World Bank. He is the head of the enterprise risk management team of GIMPA, trustee of GIMPA provident fund and occupational pension scheme. Dr. Atsu research interests include risk modelling and management; economic and financial modelling and forecasting; behavioral finance, and survival analysis of corporate entities. He holds a PhD in Finance, MSc in Financial Mathematics and BSc (Hons) in Mathematics.

Ramjee Prasad, CTIF Global Capsule, Dept. of Business Development and Technology, Aarhus University, Herning, Denmark

Ramjee Prasad, a Fellow of IEEE, IET, IETE, and WWRF, is a Professor of Future Technologies for Business Ecosystem Innovation (FT4BI) in the Department of Business Development and Technology, Aarhus University, Herning, Denmark. He is the Founder President of the CTIF Global Capsule (CGC). He is also the Founder Chairman of the Global ICT Standardization Forum for India, established in 2009. He has been honored by the University of Rome “Tor Vergata”, Italy as a Distinguished Professor of the Department of Clinical Sciences and Translational Medicine on March 15, 2016. He is an Honorary Professor of the University of Cape Town, South Africa, and the University of KwaZulu-Natal, South Africa. He has received Ridderkorset of Dannebrogordenen (Knight of the Dannebrog) in 2010 from the Danish Queen for the internationalization of top-class telecommunication research and education awards such as IEEE Communications Society Wireless Communications within the field of wireless and personal communication, 2014 IEEE AESS. He has received several international Technical Committee Recognition Award in 2003 for making contribution in the field of “Personal, Wireless and Mobile Systems and Networks”, Telenor’s Research Award in 2005 for impressive merits, both academic and organizational, Outstanding Organizational Leadership Award for: “Organizational Leadership in developing and globalizing the CTIF (Center for TeleInFrastruktur) Research Network”, and so on. He has been the Project Coordinator of several EC projects namely, MAGNET, MAGNET Beyond, eWALL. He has published more than 50 books, 1000 plus journal and conference publications, more than 15 patents, over 140 Ph.D. Graduates and a larger number of Masters (over 250). Several of his students are today worldwide telecommunication leaders themselves.


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