Cybersecurity Incidences: Stock Market Reaction to Different Types of Breaches

Cybersecurity incidences are generally understood to be negative events, but the empirical evidence for how it affects firm value is unclear. This paper examines how the stock market responds to cyber breach disclosures, focusing on the nature of the breach, magnitude of the breach, and the industry of the affected firm. Using 1,468 breach events from the Privacy Rights Clearinghouse, I analyzed the market reactions over a (-15, +3) event window. Regression shows that there is a small but notable negative market reaction to cybersecurity incidences, but it is not driven by the size or nature of the attack. Financial institutions and retail businesses face meaningfully stronger negative reactions. Interactions between breach types, breach size, and organization type also reveal no robust significance. This suggests that investors react to the occurrence of a breach, but do not differentiate between the nuances. While cyberattacks are damaging to the firm, the market penalties are not exceptional.