Data breaches affect stock performance in the long run, study finds

September 14, 2018 TH Author

A multi-year study on the stock price evolution for breached companies reveals that data breaches have a long-term impact on a company’s stock price, even if it’s somewhat minimal.

The study, carried out by the research team behind the CompariTech web portal, looked only at companies listed on the New York Stock Exchange (NYSE) that suffered and publicly disclosed breaches of one million records and over in the past three years.

In total, the list included 28 companies, such as Apple, Adobe, Anthem, Community Health Systems, Dun & Bradstreet, eBay, Equifax, Experian, Global Payments, Home Depot, Health Net, Heartland Payment Systems, JP Morgan Chase, LinkedIn, Monster, T-Mobile, Sony, Staples, Target, TJ Maxx, Under Armour, Vodafone, and Yahoo.

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“In the long term, breached companies underperformed the market,” the CompariTech team concluded in their report.

“After 1 year, Share price grew 8.53% on average, but underperformed the NASDAQ by -3.7%. After 2 years, average share price rose 17.78%, but underperformed the NASDAQ by -11.35%. And after three years, average share price is up by 28.71% but down against the NASDAQ by -15.58%.”

Study authors noted that the impact of data breaches likely diminished over time, but the damage was still visible in the stock’s NASDAQ performance indicator even after three years, in some cases.

Although other factors also weighed into how a stock performed, the fact that all of the analyzed breached companies had a poor performance cannot be ignored.

Also: British Airways breach caused by the same group that hit Ticketmaster

Experts say that companies usually suffered the worst hit, with stock prices hitting their lowest point, 14 market days following a breach when share prices fell 2.89% on average, and underperformed the NASDAQ by -4.6%.

In most cases, share prices rebounded with NASDAQ performance indicators after one month, started performing even better than before the breach, but later started falling in the long run.

CompariTech said finance and payment companies saw the largest drop in share price performance, while the healthcare sector was the least affected.

Another observation was that breaches that leaked highly sensitive information like credit card and social security numbers saw the larger drops in share price performance on average when compared to breaches where financial data was not included.

This is the second iteration of this particular CompariTech study, with a previous version being published last year, in 2017.