THE IMPACT OF DATA BREACH ON SUPPLIERS' PERFORMANCE: THE CASE OF TARGET
2020-05-07T21:00:45Z (GMT) by
The author investigated the condition under which competition effect and contagion effect impact the suppliers of the firm encountering data breach. An event study was conducted to analyze the stock price of 104 suppliers of Target after the large-scale data breach in 2013. The result showed that suppliers with high dependence on Target experienced negative abnormal return on the day after Target’s announcement, while those with low dependence experienced positive abnormal return. After regressing the abnormal return on some explanatory variables, the result showed that firms with better operational performance and high information technology capability were less negatively affected. This study suggested that suppliers who relatively highly rely on one customer company are susceptible for the negative shock from that customer because of contagion effect. Furthermore, maintaining good performance and investing in information technology can help firms reduce losses from negative events happened in customer companies.