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Data Breaches To Affect Stocks Long Term

Oct 18 2018


A recent study discovered that the stock value of 28 companies affected by large data breaches has not performed as well as they might have otherwise. The study lasted several years and determined that the flow of stock prices for these breached companies has been impacted negatively. The total effect for each company ranges from moderate to minimal.

The study was conducted by the research team that stands behind the CompariTech web portal. They only looked at companies that were listed on the New York Stock Exchange (NYSE) and also publicly admitted to very large data breaches. The final criterion was that these breaches occurred within the past three years.

The research team put 28 companies on the list. This includes household names such as Anthem, Experian, Apple, Community Health Systems, Adobe, Dun & Bradstreet, eBay, Global Payments, Home Depot, JP Morgan Chase, Heartland Payment Systems, Health Net, LinkedIn, T-Mobile, Monster, Staples, Sony, TJ Maxx, Target, Under Armour, Yahoo, T-Mobile and Vodafone.

The report remarks that these large companies with huge data leaks under-performed the rest of the stock market. The CompaniTech Team concluded that in one year the average share price grew 8.54 percent but fell short of the NASDAQ by a negative 3.7 percent. After two years, the average price of affected companies rose 17.78 percent but under-performed by 11.35. After three years, the average price of affected companies was up by 28.71 percent but were 15.58 percent lower than otherwise expected.

The authors of the study had the opinion that the data breaches continued to have an impact even after three years, but the strength of the impact reduced over time. Some companies recovered sooner than others, but some companies' performance on the NASDAQ was still evident after the main period of study. It is inevitable that other factors influenced stock prices for each company, but the affected companies clearly had a negatively impacted stock performance.

Stock market experts say that companies typically suffer their worst losses a few days or weeks after reporting a major data breach. On average, share prices fell 2.89 percent about 14 market days after reporting a data hack. With such losses stacked against potential profit, these companies under-perform the NASDAQ by -4.6 percent.

It was not unusual for the share prices of affected companies to temporarily rebound after a month but suffer from poor performance in the long term. Companies most likely to be affected by data breaches were financial companies. Healthcare seemed to be more immune to such breaches. The greatest impact was to financial companies when credit card and social security numbers were stolen.

Facebook says security breach affected 30M, not 50M, accounts

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