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Data breach disclosures and stock price crash risk: Evidence from data breach notification laws

Author

Listed:
  • Cao, Hung
  • Phan, Hieu V.
  • Silveri, Sabatino

Abstract

Exploiting the staggered adoption of data breach notification (DBN) laws, which obligate firms to disclose data breaches when they occur, as an exogenous shock to data breach disclosures, we find that the adoption of these laws leads to higher future stock price crash risk. The positive relation between DBN laws and crash risk is more pronounced for firms with weaker corporate governance, higher financial constraints, and higher information asymmetry. Our findings suggest that investors' concerns about the consequences of data breaches and the vulnerability of breached firms' data security heighten stock price crash risk.

Suggested Citation

  • Cao, Hung & Phan, Hieu V. & Silveri, Sabatino, 2024. "Data breach disclosures and stock price crash risk: Evidence from data breach notification laws," International Review of Financial Analysis, Elsevier, vol. 93(C).
    • Handle: RePEc:eee:finana:v:93:y:2024:i:c:s1057521924000966
    DOI: 10.1016/j.irfa.2024.103164
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    Keywords

    Data security; Data breaches; Disclosure; Stock price crash risk; Bad news hoarding;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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