"Our research shows that data breaches sometimes harm a firm’s close rivals (due to spillover effects), but sometimes help them (due to competitive effects). What is more, we found that a good corporate privacy policy can shield firms from the financial harm posed by a data breach — by offering customers transparency and control over their personal information — while a flawed policy can exacerbate the problems caused by a breach. Together, this evidence is the first to show that a firm’s close rivals are directly, financially affected by its data breach and also to offer actionable solutions that could save some companies hundreds of millions of dollars.
Our research shows that sometimes a breach creates spillover, where investors perceive a guilt-by-association effect that harms the breached firm’s close rivals."
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