Columbia Law School Scholarship Archive Faculty Scholarship Faculty Publications 2019 Informed Trading and Cybersecurity Breaches Joshua Mitts Columbia Law School,
[email protected] Eric L. Talley Columbia Law School,
[email protected] Follow this and additional works at: https://scholarship.law.columbia.edu/faculty_scholarship Part of the Business Organizations Law Commons, Information Security Commons, Internet Law Commons, Privacy Law Commons, Science and Technology Law Commons, and the Securities Law Commons Recommended Citation Joshua Mitts & Eric L. Talley, Informed Trading and Cybersecurity Breaches, 9 HARV. BUS. L. REV. 1 (2019). Available at: https://scholarship.law.columbia.edu/faculty_scholarship/2084 This Article is brought to you for free and open access by the Faculty Publications at Scholarship Archive. It has been accepted for inclusion in Faculty Scholarship by an authorized administrator of Scholarship Archive. For more information, please contact
[email protected]. \\jciprod01\productn\H\HLB\9-1\HLB103.txt unknown Seq: 1 5-NOV-19 9:40 INFORMED TRADING AND CYBERSECURITY BREACHES* JOSHUA MITTS† ERIC TALLEY‡ Cybersecurity has become a significant concern in corporate and commer- cial settings, and for good reason: a threatened or realized cybersecurity breach can materially affect firm value for capital investors. This paper explores whether market arbitrageurs appear systematically to exploit advance knowl- edge of such vulnerabilities. We make use of a novel data set tracking cyber- security breach announcements among public companies to study trading patterns in the derivatives market preceding the announcement of a breach. Us- ing a matched sample of unaffected control firms, we find significant trading abnormalities for hacked targets, measured in terms of both open interest and volume.