Journal of Operational Risk

Risk.net

The economic cost of a fat finger mistake: a comparative case study from Samsung Securities’s ghost stock blunder

Yongkil Ahn

  • Unintended human input errors, eg, a mouse misclick, appear to be happening frequently.
  • Samsung Securities distributed shares worth over US$100 billion due to a keyboard input error.
  • The inadvertent mistake costs US$428 million of the company’s pre-blunder market capitalization.
  • Regulatory bodies should monitor financial institutions for their unintended fat finger errors. 

This paper quantifies the economic cost of Samsung Securities’s ghost stock blunder using the synthetic control method. As the financial world becomes more computer based, sudden price fluctuations caused by unintended human input errors appear to be happening more frequently. Samsung Securities, the Samsung conglomerate’s stock trading arm, mistakenly distributed shares worth over US$100 billion to its employees on April 6, 2018, due to a keyboard input error. The difficult process of finding a proper control group plagues comparative case studies. This study overcomes that hurdle by constructing a synthetic version of the event firm. It turns out that the company lost 12.17% (US$428 million) of its pre-event market capitalization, 3000 times the direct loss incurred, due to a fat finger mistake. The results highlight the importance of surveillance in curtailing unintended human errors such as incorrect keyboard inputs or mouse misclicks. Regulatory bodies should monitor financial institutions for their unintended errors and internal control systems.

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