Dr Pat Akey, Assistant Professor, University of Toronto
We exploit unexpected corporate data breaches to study whether firms invest in rebuilding intangible capital following negative reputation shocks. Data breaches cause long-term reductions in firm value and burn reputational capital, creating an incentive for firms to rebuild intangible capital through activities such as CSR. Using firms’ charitable contributions as a novel measure of CSR investment, we show that firms increase CSR investment and earn higher CSR scores after reputation-reducing data breaches. We find similar results using a broader sample of negative reputation shocks. Our paper is among the first to document how firms respond following the destruction of reputational capital.
Pat Akey is an Assistant Professor at the University of Toronto, having completed his PhD in Finance in 2014 from the London Business School. His research focuses on the political economy of finance and the incentives of firms to engage in prosocial behaviour. He has presented his research at numerous major academic and practitioner conferences and published in the Journal of Finance, the Journal of Financial Economics, and the Review of Financial Studies. He was awarded the 2016 Rising Scholar Award for the best paper by a young researcher published in the Review of Financial Studies. Major media outlets such as The Economist, Bloomberg, and National Public Radio have cited his work.