Insider Trading Ahead of Cyber Breach Announcements

Abstract

Abstract Stock market reactions to cybersecurity breach announcements are generally negative. We find significant evidence of opportunistic insider trading, with insiders saving an average of $35,009 due to timely selling in the three months before the announcement of a cybersecurity breach. Late filing violations by insiders are more likely to occur near the announcement of a cyber breach. The bulk of opportunistic trading tends to occur 55–72 days before the public announcement. The results lend support to the U.S. Security and Exchange Commission’s recently announced goal of tightening restrictions on insider trading ahead of cyber breach announcements.