Examination of cybercrime and its effects on corporate stock value

Abstract

Purpose Cybercrime is a prevalent and serious threat to publicly traded companies. Defending company information systems from cybercrime is one of the most important aspects of technology management. Cybercrime often not only results in stolen assets and lost business but also damages a company’s reputation, which in turn may affect the company’s stock market value. This is a serious concern to company managers, financial analysts, investors and creditors. This paper aims to examine the impact of cybercrime on stock prices of a sample of publicly traded companies. Design/methodology/approach Financial data were gathered on companies that were reported in news stories as victims of cybercrime. The market price of the company’s stock was recorded for several days before the news report and several days after. The percentage change in the stock price was compared to the change in the Dow Jones Industrial average to determine whether the stock price increased or decreased along with the rest of the market. Findings Stock prices were negatively affected in all time periods examined, significantly so in one period. Practical implications This paper describes cases concerning cybercrime, thereby bringing attention to the value of cybersecurity in protecting computers, identity and transactions. Cyber security is necessary to avoid becoming a victim of cybercrime. Specific security improvements and preventive measures are provided within the paper. Preventive measures are generally less costly than repairs after a cybercrime. Originality/value This is an original manuscript that adds to the literature regarding cybercrime and preventive measures.

Socio-Economic Factors On Sector-Wide Systematic Risk Of Information Security Breaches: Conceptual Framework

“…To study the special influence of a range of incidents, from corporate purchases to joint venture establishment to CEO progressions the method of 'event study' has been engaged comprehensively in the accounting, finance and information security literature (Bose & Leung, 2013;Cavusoglu et al, 2004;Hovav et al, 2017;Kannan et al, 2007;Rosati et al, 2017;Smith et al, 2018;Tweneboah-Kodua et al, 2018;Yayla & Hu, 2011). This statistical practise advocates that an unanticipated event is probable to influence (increase or decrease) the script price resulting an abnormal returns on script prices (MacKinlay, 1997).…”

“…While intangible costs are difficult to estimate, such as loss of trust, reputation, and confidence by business stakeholders for future transactions. Underpinned by the Efficient Market Hypothesis in its semi-strong form (Fama, 1991;Fama et al, 1969;Malkiel & Fama, 1970) researches have tried to examine the impact of IS breach announcements on stock prices for effected firms (Berkman et al, 2018;Bianchi & Tosun, 2018;Campbell et al, 2003;Cavusoglu et al, 2004;Ettredge & Richardson, 2001;Hovav & D'Arcy, 2004;Kannan et al, 2007;Malhotra & Kubowicz Malhotra, 2011;Pirounias et al, 2014;Sangvinatsos, 2017;Sinanaj & Muntermann, 2013;Smith et al, 2018;Tweneboah-Kodua et al, 2018). Most of these studies have concluded a negative impact on stock price by considering the effect of un-systematic risk factors surrounding the breach such as factors specific to that type of attack (Arcuri et al, 2017;Bose & Leung, 2014;Hovav & D'Arcy, 2003), type of firm (Cavusoglu et al, 2004;Goel & Shawky, 2009;Rosati et al, 2017) and type of industry (Pirounias et al, 2014;Yayla & Hu, 2011) as shown in Figure 01.…”

The Effects of Cybercrıme on The Stock Prıces of Companıes Exposed to Cyber Attacks

“…Siber suç genellikle yalnızca çalınan varlıklara ve iş kaybına neden olmakla kalmaz, aynı zamanda bir şirketin itibarına da zarar vermekte, bu da şirketin borsa değerini etkileyebilmektedir. Bu durum şirket yöneticileri, finansal analistler, yatırımcılar ve alacaklılar yönünden ciddi bir endişe kaynağıdır (Smith et. al., 2019).…”

“…The results are similar as in the An & Kim (2018) stated that the companies most exposed to cyber-attacks were technology, finance, e-commerce, and telecommunications companies. Smith et al, (2019) show that there is a negative but not significant impact on the market value of stock prices after cybercrime is announced. So, they concluded that the average share prices of companies fell in the days after the cybercrime news.…”

“…Siber suç, siber saldırılara karşı savunmasızlık ticari faaliyetlerin uygulanabilirliğini ve dolayısıyla şirketin gelecekteki kârlılığını tehdit ettiğinden, hissedarlar için bir endişe kaynağıdır. Yatırımcılar şirketin hisse senedi değerini düşürerek piyasa değerinin düşmesine neden olabilmektedirler (Smith et. al.., 2019).…”