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Informed Trading And Cybersecurity Breaches, Joshua Mitts, Eric L. Talley
Informed Trading And Cybersecurity Breaches, Joshua Mitts, Eric L. Talley
Faculty Scholarship
Cybersecurity has become a significant concern in corporate and commercial settings, and for good reason: a threatened or realized cybersecurity breach can materially affect firm value for capital investors. This paper explores whether market arbitrageurs appear systematically to exploit advance knowledge of such vulnerabilities. We make use of a novel data set tracking cybersecurity breach announcements among public companies to study trading patterns in the derivatives market preceding the announcement of a breach. Using a matched sample of unaffected control firms, we find significant trading abnormalities for hacked targets, measured in terms of both open interest and volume. Our results …
Irredeemably Inefficient Acts: A Threat To Markets, Firms, And The Fisc, Alex Raskolnikov
Irredeemably Inefficient Acts: A Threat To Markets, Firms, And The Fisc, Alex Raskolnikov
Faculty Scholarship
This Article defines and explores irredeemably inefficient acts – a conceptually distinct and empirically important category of socially undesirable conduct. Though inefficient behavior is, no doubt, pervasive, the standard view holds that inefficient conduct may be converted into efficient behavior by forcing actors to internalize the external harms of their decisions. For some acts, however such conversion is impossible. These acts are not just inefficient forms of otherwise socially beneficial activities – they are not just contingently inefficient. Rather, they are inefficient at their core; they reduce social welfare no matter what the regulator does. These irredeemably inefficient (or just …