Hacking Corporate Reputations
84 Pages Posted: 19 Mar 2018 Last revised: 13 Jul 2021
Date Written: January 22, 2021
We exploit unexpected corporate data breaches to study whether firms invest in rebuilding intangible capital following negative reputation shocks. Data breaches cause long-term reductions in firm value and burn reputational capital, creating an incentive for firms to rebuild intangible capital through activities such as CSR. Using firms' charitable contributions as a novel measure of CSR investment, we show that firms increase CSR investment and earn higher CSR scores after reputation-reducing data breaches. We find similar results using a broader sample of negative reputation shocks. Our paper is among the first to document how firms respond following the destruction of reputational capital.
Keywords: Corporate Social Responsibility, CSR, Corporate Reputation, Cyberattack, Data Breach
JEL Classification: G32, G31, G14, M14, D22, D23, L21, L25, L86, G38, G39
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