What this publication covers
Treats customer information breaches as service failures, not merely technical incidents. An event study links these episodes to lower company valuations and argues that service-recovery responses can reduce damage to trust and public perception.
How this reference can help
Use it to question established assumptions about people, ethics, equity, and inclusion.
Curated by Ricardo Martins
View the original abstract 🇺🇸 🇬🇧
Firms are collecting more information about their customers than ever before in an attempt to understand and better serve customer needs. At the same time, firms are becoming more vul nerable to the compromise of customer information through security breaches. This study attempts to associate breach reports with the decline in market value of firms using an event study. The results show that firms suffer significant market value depreciation over a short as well as a long time window. Further, the greatest devaluation occurs when larger amounts of customer information are compromised at large companies. Due to the greater potential of customer backlash, negative pub licity and liability risk, managers must view customer informa- tion breaches as service failures rather than as information system failures. Employing established service failure recovery stra- tegies may allow firms to quickly and proactively address customer privacy concerns and thereby mitigate negative market reaction to information breaches.