Health Information Management

Report claims breaches have minimal effect on share price

HIPAA Weekly Advisor, July 10, 2006

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Although companies risk liabilities, fines, and loss of reputation, sales, and partnerships from privacy and security breaches, the effect of these breaches on publicly traded share prices is minimal, researchers from Harvard and Carnegie Mellon say in a draft research paper.

"Is there a cost to privacy breaches? An event study" examines 78 breaches that occurred from 2000-2006 and the effect of those breaches on stock prices. Researchers found that there was only a brief negative impact on share prices.

Establishing strong privacy and security controls therefore should not be motivated by a concern over stock price, they argue. However, the study's authors acknowledged that compliance concerns and publicity were strong motivations.

Click here to read the draft study.



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