Please be Silent? Examining the Impact of Data Breach Response Strategies on the Stock Value.

Incidents of security breaches have increased and caused immense damage, affecting the stock price. Data breaches are particularly problematic as they have fatal consequences on customer relations. By applying recovery actions after a data breach, a company is able to mitigate these consequences. However, there is a controversy: The recovery actions offered to customers are perceived differently by the company's investors. While customer loyalty can be maintained, the value of the company's stock is damaged. This study examines this controversy through an event study. Real response strategies to data breaches are coded and their effects on investor behavior are examined on the basis of stock value. The results show that apologizing a data breach has harmful effects on investor behavior. The opposite might occur if the response is whitewashed. Further effects can be determined by the affected group and the year of the data breach. [ABSTRACT FROM AUTHOR]