Security Breaches and Firm Value

Abstract Security breaches may be a normal risk of doing business, or they may result in economic losses and changes in business valuation. A small number of studies outside the finance literature find mixed results regarding the economic impact of security breaches. In this paper, we examine a large sample to determine whether breaches result in significant economic losses and whether the announcement venue has an impact on business valuation. We find a negative and significant impact on firm value when the breach is announced in one of four major news outlets. When the announcement is elsewhere, the impact is minimal. Recommended Citation Bolster, Paul; Pantalone, Coleen H.; and Trahan, Emery A. (2010) "Security Breaches and Firm Value," Journal of Business Valuation and Economic Loss Analysis: Vol. 5 : Iss. 1, Article 1. DOI: 10.2202/1932-9156.1081 Available at: http://www.bepress.com/jbvela/vol5/iss1/art1