Social Science Principles

Makridis (2021) explores how data breaches, which are quite prevalent now, impact a firm’s value and reputation. This study focuses on behavioral economics and examines how certain individuals respond to data breaches and how its implication affects their trust and opinion of the affected firm (Makridis 2021). This study also ties in the principles of psychology and sociology to better understand how reputational damage translates to economic repercussions (Makridis 2021).

Research Questions and Hypotheses 

In this article by Makridis (2021), he doesn’t specifically formulate a hypothesis. However, the research in this article implies that data breaches negatively affect a firm’s reputation (Makridis 2021). 

The study posed the following questions.

  • What are the relationships between data breaches and a firm’s reputation, specifically brand power and awareness?
  • Does the size of a data breach affect a firm’s reputation differently? 
  • Do firms in different industries (Consumer-facing versus non-consumer-facing) influence data breaches and reputation? 

Research methods

This study uses a qualitative research approach. Makridis used econometric analysis to study the relationship between data breaches and changes in the Firm’s power and familiarity. 

Data and Analysis 

The author constructed a dataset by intertwining three distinct sources of data. 

First, Makridis used the CoreBrand Index. This index provides information on corporate brand perception. The data shows business decision-making and offers insight for investors and customers as well as brand power, familiarity, and favorability data for over 1000 companies from 2001-2018 (Makridis 2021). The second source Makridis used was Compustat which is a database that provides financial data for publicly traded companies. Lastly, Makridis used the database Privacy Rights Clearinghouse (PRC). This database shows data breaches that have been reported through the state Attorney General and the Department of Health and Human Services.

Connection to Powerpoint Presentation

The author utilized the Multi-Method Research concept. This approach advocates for the use of multiple methods of research for a certain study. Makridis combined data from three different sources regarding brand perception, financial data, and reported data breaches. This made it easier to understand the relationship between data breaches and brand reputation. 

How the Topic Relates to the Challenges, Concerns, and Contributions of Marginalized Groups

The article focuses on the economic ramifications of data breaches for companies. It doesn’t particularly talk about the challenges, concerns, and contributions of marginalized groups. However further research could study how data breaches can disproportionately impact certain groups.

Overall Contributions of the Study to Society

Reputational Impact: This study shows how not all data breaches harm companies. It’s observed that small companies that receive small-scale breaches may boost the company’s brand awareness (Makridis 2021). This is a fascinating and important approach to data security. 

Policy Implications: By proving that some small-scale breaches do not always have negative ramifications for companies, this article highlights the limitations of some cybersecurity policies. From the knowledge gathered from this study, it may incentivize appropriate investment and research in data security measures.

Conclusion

Makridis’s research provides valuable insights into understanding the complicated relationships of economic ramifications, data breaches, and corporate reputation. It underscores the need for more advanced approaches toward cybersecurity, risk management, and reputation management in the modern digital world. 

References:

Makridis, C. A. (2021). Do data breaches damage reputation? evidence from 45 companies between 2002 and 2018. Journal of Cybersecurity, 7(1). https://doi.org/10.1093/cybsec/tyab021