Hacking Corporate Reputations

We exploit unexpected corporate data breaches to study the loss and repair of corporate reputation. Reputation loss decreases equity value and brand value, increases customer churn and prompts more negative media coverage. Firms repair their reputation by increasing their charitable donations (a novel measure of CSR investment), political contributions, employee wages and investment in IT. These actions are targeted to stakeholders that are particularly important or in situations that are particularly salient to their stakeholders. We observe similar dynamics of reputation loss and repair following the release of negative news about firms’ social behaviors.