Hacking corporate reputations

Abstract We exploit unexpected corporate data breaches to study the loss and repair of corporate reputation. Reputation loss decreases equity and brand values, increases customer churn, and prompts more negative media coverage. Firms repair their reputation by increasing their charitable donations and have CSR scores that are more than 0.5 standard deviations higher.

They increase political contributions, employee wages, and IT investment. 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.