Examination of cybercrime and its effects on corporate stock value
| Date | 11 March 2019 |
| DOI | https://doi.org/10.1108/JICES-02-2018-0010 |
| Published date | 11 March 2019 |
| Pages | 42-60 |
| Author | Katherine Taken Smith,Amie Jones,Leigh Johnson,Lawrence Murphy Smith |
| Subject Matter | Information & knowledge management,Information management & governance,Information & communications technology |
Examination of cybercrime and its
effects on corporate stock value
Katherine Taken Smith
Department of Management and Marketing,
Texas A&M University Corpus Christi, Corpus Christi, Texas, USA
Amie Jones and Leigh Johnson
Murray State University Arthur J. Bauernfeind College of Business,
Murray, Kentucky, USA, and
Lawrence Murphy Smith
Department of Accounting, Texas A&M University Corpus Christi,
Corpus Christi, Texas, USA
Abstract
Purpose –Cybercrime is a prevalentand serious threat to publicly traded companies. Defendingcompany
information systems from cybercrime is one of the most important aspects of technology management.
Cybercrimeoften not only results in stolen assets and lost businessbut also damages a company’s reputation,
which in turn may affectthe company’s stock market value. This is a seriousconcern to company managers,
financial analysts, investors and creditors. This paper aims to examine the impact of cybercrime on stock
prices of a sampleof publicly traded companies.
Design/methodology/approach –Financial data were gathered on companies that were reported in
news storiesas victims of cybercrime. The market price of the company’sstock was recorded for several days
before the news reportand several days after. The percentage changein the stock price was compared to the
change in the Dow Jones Industrialaverage to determine whether the stock price increasedor decreased along
with the rest of the market.
Findings –Stock priceswere negatively affected in all time periodsexamined, significantly so in one period.
Practical implications –This paper describes cases concerningcybercrime, thereby bringing attention
to the value of cybersecurityin protecting computers, identity and transactions.Cyber security is necessary to
avoid becoming a victim of cybercrime. Specific security improvements and preventive measures are
providedwithin the paper. Preventive measures aregenerally less costly than repairs after a cybercrime.
Originality/value –This is an original manuscript that adds to the literatureregarding cybercrime and
preventivemeasures.
Keywords Business ethics, Computer ethics, Financial information, Cybercrime, Computer security,
Stock value
Paper type Research paper
Introduction
The development and use of the computer and the internet have created numerous benefits for
businesses, such as e-commerce, faster transactions, better communication and increased
marketing possibilities. The internet created additional opportunities for growth and expansion
for businesses worldwide. However, these benefits also come with potential threats to
information security. Cybercrime is an increasing and prevalent threat to the business
operations of publicly traded companies. Cybercrime costs businesses billions of dollars every
year in prevention efforts, stolen assets, lost business and damage to a company’sreputation.
JICES
17,1
42
Received2 February 2018
Revised23 April 2018
13August 2018
Accepted24 August 2018
Journalof Information,
Communicationand Ethics in
Society
Vol.17 No. 1, 2019
pp. 42-60
© Emerald Publishing Limited
1477-996X
DOI 10.1108/JICES-02-2018-0010
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1477-996X.htm
While there has been considerable research on these costs, there has been little research
addressing the direct cost to a company’s shareholders, that is, the effect of cybercrime on a
company’sstockprice.
Cybercrime is a concern to shareholders, as vulnerability to cybercrime threatens the
viability of business operations and, thereby, the company’s future profitability.
Investors may downgrade the corporation’s stock value, causing its market valuation to
decline. This paper examines cybercrime, its threat and its effect on publicly traded
companies’stock prices. This study analyzes ten case studies of highly publicized
cybercrimes perpetrated against publicly traded companies. The research questions
addressed are:
RQ1. How do cybercrime news stories affectstock prices in publicly traded companies?
RQ2. How does this impactaffect everyday consumers?
Literature review
The invention of the first electronic computer in 1946 was considered a breakthrough in
processing technology and created a pathway to new opportunities for communication
and business. Not long after the first use of electronic data interchange, the first record of
cybercrime was committed. According to Norton Security Symantec Corporation,
cybercrime is a “crime that has some kind of computer or cyber aspect to it”(Norton,
2016,p.1).Thefirst account of cybercrime occurred in 1970 and involved a teller at New
York’s Dime Savings Bank who used a computer to embezzle over $2m (Wavefront,
2016). Eight years later, the first spam email was sent over ARPAnet, the US Defense
Department network, by a Digital Equipment Corporation marketing executive (Julien,
2016). As computer usages have greatly increased over time, so too cybercrime has
greatly increased over time. Threats to computer security range from minor attacks to
large-scale cybercrime activity. Table I shows a timeline of historical events pertaining to
the e-commerce and cybercrime.
Cybercrime has many incentives for hackers. Hackers are generally defined as persons
who use computers “to gain unauthorized access to data”(Oxford Dictionary, 2018b).
Cybercrime produceshigh returns at low risk and a relatively low cost for thehacker. Unlike
the other types of crime,cybercrime allows hackers to hide behind computer screensand not
have physical confrontation. The incentive to steal more is irresistible for hackers and
creates a potential for almost instantpersonal gain with the click of a button. Hackers have
economical, personal, ideologicaland structural motivations to commit cybercrime. Hackers
may see an opportunity for personal gain or the chance to carry out personal vendettas.
Cybercriminals may also make a profit by selling stolen information on the Black Market.
On an international scale, cybercrime has occurred between governments. In many cases,
cybercriminals choose their victims strategically and look for points of weakness in the
target (Smith et al.,2011).
Hackers view both individuals and publicly traded companies as potential targets. The
average person is aneasy target because many people use technology. “Withmore and more
people using the Internet to store personal information, there is increasing potential for
personal informationrewards”(Mercer, 2016, p. 1). Many people do not check the securityof
networks, neglect the protectionof their everyday software with passcodes and use personal
information for shopping over the internet.Often times, people disregard the safety of their
transactions and neglect taking preventive measures. Transactions involving e-commerce
compromise sensitive information that can be retrieved if the data were hacked (Mercer,
2016).
Examination
of cybercrime
43
To continue reading
Request your trial