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Timing in Information Security: An Event Study on the Impact of Information Security Investment Announcements

 

 

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Source
Journal of Information System Security
Volume 16, Number 1 (2020)
Pages 331
ISSN 1551-0123
Authors
Eva Szubartowicz — Regensburg University, Germany
Guido Schryen — Paderborn University, Germany
Publisher
Information Institute Publishing, Washington DC, USA

 

 

Abstract

Timing plays a crucial role in the context of information security investments. We regard timing in two dimensions, namely the time of announcement in relation to the time of investment and the time of announcement in relation to the time of a fundamental security incident. The financial value of information security investments is assessed by examining the relationship between the investment announcements and their stock market reaction focusing on the two time dimensions. Using an event study methodology, we found that both dimensions influence the stock market return of the investing organization. Our results indicate that (1) after fundamental security incidents in a given industry, the stock price will react more positively to a firm’s announcement of actual information security investments than to announcements of the intention to invest; (2) the stock price will react more positively to a firm’s announcements of the intention to invest after the fundamental security incident compared to before; and (3) the stock price will react more positively to a firm’s announcements of actual information security investments after the fundamental security incident compared to before. Overall, the lowest abnormal return can be expected when the intention to invest is announced before a fundamental information security incident and the highest return when actual investing after a fundamental information security incident in the respective industry.

 

 

Keywords

Event Study, Information Security, Investment Announcements, Stock Price Reaction, Value of Information Security Investments.

 

 

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