Authors Zhaoxin Lin, Travis R.A. Sapp, Jackie Rees Ulmer, and Rahul Parsa examine insider trading data in order to assess the significance of this issue.
In their article, “Insider Trading Ahead of Cyber Breach Announcements,” the authors report on their review of stock price responses following 258 announced cyber breaches that occurred from 2011 to 2016. Based on historical insider sales, the authors catalogue sales as routine or opportunistic, to the extent data is available. The authors identify a statistically significant sample of sales prior to announcements of breaches. Opportunistic sales, or sales occurring in close proximity to a cybersecurity breach announcement by insiders that do not have an established trading program, produced significant abnormal savings for the insider sellers. Of course, the study cannot confirm that such trades were made in violation of the securities laws, but perhaps does suggest that companies reviewing their cybersecurity-related policies and procedures ought to give thought to information handling.