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Short selling surrounding data breach announcements

Author

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  • Wang, Heng Emily
  • Wang, Qin Emma
  • Wu, Wentao

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, an abnormal level of short-selling costs around data breach announcements indicates that short sellers exploit prior knowledge of data breaches. On a cross-sectional basis, we find that short-selling activities strongly correlate with negative cumulative abnormal returns (CARs). Furthermore, we provide evidence that short-selling activities play a positive role in capital market.

Suggested Citation

  • Wang, Heng Emily & Wang, Qin Emma & Wu, Wentao, 2022. "Short selling surrounding data breach announcements," Finance Research Letters, Elsevier, vol. 47(PB).
    • Handle: RePEc:eee:finlet:v:47:y:2022:i:pb:s1544612322000198
    DOI: 10.1016/j.frl.2022.102690
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    References listed on IDEAS

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    Cited by:

    1. Gunay, Samet & Goodell, John W. & Muhammed, Shahnawaz & Kirimhan, Destan, 2023. "Frequency connectedness between FinTech, NFT and DeFi: Considering linkages to investor sentiment," International Review of Financial Analysis, Elsevier, vol. 90(C).
    2. Peng, Jin & Zhang, Haofei & Mao, Juan & Xu, Shouhuai, 2023. "Repeated data breaches and firm value," Economics Letters, Elsevier, vol. 224(C).
    3. Elmawazini, Khaled & Saadi, Samir & Sassi, Syrine & Khiyar, Khiyar Abdalla & Ali, Mohammed, 2023. "Do data breach disclosure laws matter to shareholder risk?," Finance Research Letters, Elsevier, vol. 53(C).
    4. Bernales, Alejandro & Beuermann, Diether W. & Cumming, Douglas & Olid, Christian, 2023. "Blue-Collar Crime and Finance," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 83(C).
    5. Ben Chamberlain & Zhangxin (Frank) Liu & Lee A. Smales, 2023. "Short interest and the stock market relation with news sentiment from traditional and social media sources," Australian Economic Papers, Wiley Blackwell, vol. 62(2), pages 321-334, June.

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    More about this item

    Keywords

    Informed knowledge; Short selling; Data breaches; Cumulative abnormal returns (CARs); Market quality; Price discovery;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • K24 - Law and Economics - - Regulation and Business Law - - - Cyber Law

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