Abstract
The importance of signaling to inform the public of a security incident occurrence at a firm through an official press release is discussed. The majority of prior research has discussed the impact of public knowledge of a security incident occurrence on the share prices of a firm. This study analyzes two competing models of the relationship between a firm’s reputation and the firm doing a press release, and the subsequent impact on the market valuation of the firm. Content of the press release that is specific to information security, overt CEO involvement and transparency in data affected, serves as an additional signal for the market. A switching regression model of 169 security incidents (with and without an official press release) versus a Heckman Sample Selection model of 111 security incidents (with an official press release) of publicly traded firms between 2014 and 2021 upholds the logic of the signaling characteristic of the decision to do an official press release with respect to the reputation of the firm. The roles of overt CEO involvement and transparency in data affected under this framework is statistically significant.
Recommended Citation
Menon, Nirup M.; Ngac, Brian; and Diouf, Fatou, "The value relevance of an official press release of a security breach and complementarities between the content elements of the release" (2022). WISP 2022 Proceedings. 9.
https://aisel.aisnet.org/wisp2022/9