In today’s era of increased scrutiny and calls for regulation around data privacy, security breaches are bad news for both corporations and consumers, often having a negative effect on a company’s stock price—although that impact has decreased in recent years as Wall Street becomes used to more frequent data breaches.
The report finds that share prices fell 7.27% on average after a data breach, hitting a low point almost three weeks later, with those that leak highly sensitive information—like credit card and social security numbers—unsurprisingly leading to greater drops in a company’s share price. The size of a breach does not directly correlate to bigger drops in stock prices, however; companies that had the most records exposed saw their stock actually recover and outperform the market, while companies with smaller breaches saw their shares struggle in the six months after the fact.
Older breaches, those before 2012, like TJ Maxx or Sony, surprisingly met with stronger negative reactions from Wall Street than more recent ones like Adobe or Equifax. Increasingly common data breaches in recent years have have led to a “breach fatigue” effect—where the market is less shaken by them as time goes on, according to theBreached companies underperform the market in the long term, growing 8.38% on average over the following year but still trailing the Nasdaq by 6.
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