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Research: How cyber attacks affect company stock value



As you know, financial markets do not always differ in rational behavior, and the value of shares of companies may not coincide with their “real” price (our analytical materials help in understanding the situation). Although speculation on this topic can be perceived by the market itself is quite painful. So in September 2014, the words of analyst Morgan Stanley, who repeated the concerns of the founder of Tesla Motors Inc Ilona Mask that the company's shares are somewhat overvalued, dropped them by 9.1%.

News is different. We have previously cited an analysis of the leading popular blog Financial Hacker, which, using the example of the establishment of a limit for the euro / franc by the National Bank of Switzerland, showed that traders' reaction to potentially explosive news could be slowed down. In his opinion, financial markets react instantly and harshly to any news with a clear indication of the price movement up or down. But slowly digest information that implies minimal interpretation.
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And it is to such news are the announcements of cyber attacks on companies whose shares are listed on the stock exchange. Today we will try to find out how much the news about such security incidents affect the stock price.

News and economy


The theme of the impact of economic news on the stock market, we discussed in detail in one of the past articles. But with news that is indirectly related to the financial results of a company, things are not so simple.

Negative news infects the market quickly. Examples are many. Many simply ignore the fact-checking of such things, so there is still room for market manipulation in this direction. An example is the story of the Scottish trader Alan Craig. In November 2015, he fell for creating fake Twitter accounts of two research companies. In them, he published false information about the opening of investigations against companies Audience Inc. and Sarepta Therapeutics. As a result, their shares fell by 28% and 16% respectively.

Study: the impact of hacks on the stock price


News about cyber attacks on companies whose shares are traded on exchanges, can also be classified as negative. But in this case, the reaction of the markets is not so straightforward. The number of cases of recorded fall in the value of shares of companies after hacking is not so great - over the past few years, only a few similar facts can be found.


Obviously, not all information security threats become public. Not all such cases become a reason for changing quotes. At our disposal were two more or less fresh and detailed research on the topic of how information system hacks affect the company's position in the market.

In the first of these, Italian scientists checked data on cyber attacks for 1995-2012 and assessed their impact on the value of the shares of the affected companies using the event method. The total number of cyber attacks, which fell into the calculations for such a huge period amounted to 128 (37 of them took place in relation to financial institutions). The total number of companies is 81.

The first conclusion of the researchers: reports of cyber attacks really affect the stock price. In almost all cases of hacking, the market’s reaction to the news eventually followed. But for different types of companies, it was different. Organizations of the financial sector, oddly enough, feel less the impact of reports of hacking information systems. Most of all, news about cyber attacks is perceived in relation to firms whose business is closely related to information technology.

The second study on a similar topic was conducted by the University of Tokyo. In this case, the object of study was the stock market of Japan. It turned out that the reaction to the news about cyber attacks here is much slower than in the United States. On average, it is 10 days from the date of publication.



The authors also found that the market reaction is more influenced by the price / balance value ratio of the company than its type or size.

Another factor noted in the study is the size of the article itself, which is reported in the incident. The greater the number of characters, the more seriously the security threat is perceived.

Conclusion


One of the main conclusions that can be made on the basis of an analysis of the results of research by European and Asian scientists is the fact that public companies are striving to hide information about cyber attacks on their systems. Otherwise, 128 cases of publications on hacking in 18 years from the first study cannot be explained.

But even if information about the hacking of an information system leaked into open sources, this does not lead to an automatic “subsidence” of the stock price. It all depends on the geography of the company, its specialization, size and the ratio of price to book value.

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Source: https://habr.com/ru/post/372245/

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