“…However, given that breached firms are probably viewed as a higher credit risk by the financial markets and therefore face higher costs of capital, we expect that they would find it difficult to raise external financing, and, therefore, external financing activities should decline after the disclosure of a breach incident. To test this, we specify the following model: Following Dierker et al (2019), we use two measures of external financing: (1) External Equity Financing , estimated as the ratio of the difference between the sale of common and preferred stocks (SSTK) and the purchase of common and preferred stocks (PRSTKC) to total assets at the beginning of the year, and (2) External Debt Financing , estimated as the ratio of long‐term debt issuance (DLTIS) minus long‐term debt reduction (DLTR) to total assets at the beginning of the year. The term is a vector of controls.…”