An Exploratory Study on Corporate Reputation Damage Due to Data Security Incidents

Jerry Kerrisk, Pace University


A persistent danger for many organizations is the prospect of a security breach impactful enough to harm one's corporate reputation. Using Exploratory Data Analysis, this research utilized an event study to identify why such an incident triggers heterogeneous capital market outcomes. To provide a more solid foundation for this exploration, definitional clarity involving several socially constructed variables of interest was provided. Variables such as reputation, status, celebrity, legitimacy, stigma, brand, identity, and image were studied. Market response to a security breach, on average, resulted in a short-term adverse market reaction; however, variations occurred. A correlation between Environmental, Social, and Governance (ESG) ratings and capital market movement existed, explaining some of the disparate results. Furthermore, factors such as status, size, reliability, good governance, type of breach, industry, announcement timing also had an impact on the market response. Post-breach behavior such as advertising was not useful in reputation repair; however, R&D spending did help. Moreover, a predictive model supported additional investments in the ESG category of employee and governance to reduce the odds of being breached. This research discovered that the growth of intangible assets is altering strategies to achieve sustainable competitive advantage. Past business-as-usual tactics primarily focused on tangible assets are no longer adequate. Research findings indicate that an inflection point in strategic management is upon us, requiring a socially-focused approach to reputation. To that end, business-for-society is today's path to sustainable competitive advantage.

Subject Area

Business administration|Information Technology|Management|Sustainability|Business education

Recommended Citation

Kerrisk, Jerry, "An Exploratory Study on Corporate Reputation Damage Due to Data Security Incidents" (2020). ETD Collection for Pace University. AAI28153137.



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