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Do US State Breach Notification Laws Decrease Firm Data Breaches?

Author

Listed:
  • Vaaler Paul M.

    (Law School and Carlson School of Management, University of Minnesota Twin Cities, Mondale Hall,, Room 412, 229 19th Avenue South, Minneapolis, MN, USA)

  • Greenwood Brad

    (School of Business, George Mason University, Fairfax, VA, USA)

Abstract

From 2003 to 2018, all 50 states and the District of Columbia enacted breach notification laws (BNLs) mandating that firms suffering data breaches provide timely notification to affected persons and others about breach incidents and mitigation responses. BNLs were supposed to decrease data breaches and develop a market for data privacy where firms could strike their preferred balance between data security quality and cost. We find no systemic evidence for either supposition. Results from two-way difference-in-difference analyses indicate no decrease in data breach incident counts or magnitudes after BNLs are enacted. Results also indicate no longer-term decrease in data misuse after breaches. These non-effects appear to be precisely estimated nulls that persist for different firms, time-periods, data-breach types, and BNL types. Apparently inconsistent notification standards and inadequate information dissemination to the public may explain BNL ineffectiveness. An alternative federal regime may address these shortcomings and let a national BNL achieve goals state BNLs have apparently failed to meet.

Suggested Citation

  • Vaaler Paul M. & Greenwood Brad, 2023. "Do US State Breach Notification Laws Decrease Firm Data Breaches?," Review of Law & Economics, De Gruyter, vol. 19(3), pages 263-316, November.
    • Handle: RePEc:bpj:rlecon:v:19:y:2023:i:3:p:263-316:n:1
    DOI: 10.1515/rle-2023-0038
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    More about this item

    Keywords

    data security; breach notification laws; consumer privacy; difference in differences;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • M15 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - IT Management
    • M48 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Government Policy and Regulation
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics
    • K2 - Law and Economics - - Regulation and Business Law

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