Cloud Computing Security Announcements: Assessment of Investors' Reaction

Security and availability risks have become one of the biggest challenges for firms that are transitioning into the cloud and for firms offering the cloud services as well. Security issues have gained prominence in recent years due to the unprecedented growth in Cloud computing service offerings and their adoption. An event of a security breach may impact investors' perceptions of a firm's value. In fact, prior studies have shown that information security breaches and countermeasures have a significant impact on the firm's stock price. Thus, publicly announcing breach and countermeasures is one way by which firms manage these issues related to cloud security. The focus of this paper is to use event study methodology to investigate how cloud security breach and countermeasures announcements affect the firm and its competitor's stock price. Our research shows that cloud security breach announcements have significant negative impact on the firms and its competitor's stock value. Surprisingly, cloud security countermeasure announcements have significant negative impact on the firm and the competitor's stock value.