A Publication of the Association of Management THE IMPACT OF INFORMATION SECURITY BREACHES ON FINANCIAL PERFORMANCE OF THE BREACHED FIRMS: AN EMPIRICAL INVESTIGATION

This study investigates the impact of information security breaches on firm performance. Unlike previous studies that used an event study methodology, we used a matched-sample comparison analysis to investigate the impact of security breaches on firm performance. To investigate this impact, we considered subsequent four quarters following the security breach and determine if the breached firms ’ performance decreased compared to that of the peer firms (control group). Although the breached firms ’ sales and operating income did not decrease in the subsequent quarters following the breach, return on assets decreased in the third quarter. Also, performance of the control firms was higher compared to that of the treatment firms in general. However, the breached firms ’ sales increased significantly in the fourth quarter compared to those of the control firms