How does the Stock Market Reacts to Information Security Investment of Firms in Korea : An...


How does the Stock Market Reacts to Information Security Investment of Firms in Korea : An Exploratory Study


Jaeyoung Park (Graduate School of Information, Yonsei University)

Woojin Jung (Graduate School of Information, Yonsei University)

Beomsoo Kim (Graduate School of Information, Yonsei University)


Recently, many South Korean firms have suffered financial losses and damaged corporate images from the data breaches. Accordingly, a firm should manage their IT assets securely through an information security investment. However, the difficulty of measuring the return on an information security investment is one of the critical obstacles for firms in making such investment decisions. There have been a number of studies on the effect of IT investment so far, but there are few researches on information security investment. In this paper, based on a sample of 76 investment announcements of firms whose stocks are publicly traded in the South Korea's stock market between 2001 and 2017, we examines the market reaction to information security investment by using event study methodology. The results of the main effects indicate that self-developed is significantly related to cumulative average abnormal returns (CAARs), while no significant effect was observed for discloser, investment characteristics and firm characteristics. In addition, we find that the market reacts more favorably to the news announced by the subject of investment than the vendor, in case of investments with commercial exploitation. One of main contributions in our study is that it has revealed the factors affecting the market reaction to announcement of information security investment. It is also expected that, in practice, corporate executives will be able to help make an information security investment decision.


Abnormal Returns, Discloser, Event Study, Information Security Investment, Investment Characteristics, Market Reaction, Market Value

Journal of Information Technology Services, Vol.17 No.1, pp.33-45

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