PACIS 2022 Proceedings

Paper Number

1283

Abstract

The impacts of data breaches have received much attention from information systems researchers; however, most studies have focused on breached firms. The organizational crisis literature suggests that negative perceptions from an organizational crisis can spread to others in the same industry, and this negative crisis spillover can cause significant losses to them. This study examines whether and how a data breach affects firm values of non-breached firms using the event study. We find that a data breach that occurs due to an industry-wide problem is likely to decrease the shareholder value of industry peers. Also, it has been shown that the data breach risk contagion effect is stronger for industry peers that have visibly disclosed data breach risks in their 10-K report before the data breach events. This study advances our knowledge of the impacts of data breaches by providing empirical evidence for the negative spillover effects of data breaches.

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