Assessing Corporate Reputational Damage of Data Breaches: An Empirical Analysis

Corporate reputation represents a core asset of companies and research has shown that better reputation can have positive effects such as increased revenues and sales. On the other hand, companies may suffer reputational damage that can result from internal or external and potentially unforeseen events such as operational losses. In this paper, we present an empirical analysis of how unforeseen IT security incidents have an impact on corporate reputation. With a focus on data breaches, i.e. situations in which internal information has been lost or stolen, we have conducted an event study providing evidence that newly published data breach has a negative effect on firm value. While this finding confirms existing research in this field, we also applied a method that aims at isolating the related reputation effects in the context of data breaches. Thereby, our results provide new insights into how IT security incidents do negatively impact corporate reputation.