Do US State Breach Notification Laws Decrease Firm Data Breaches?

Vaaler Paul M. () and Greenwood Brad
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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

Review of Law & Economics, 2023, vol. 19, issue 3, 263-316

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.

Keywords: data security; breach notification laws; consumer privacy; difference in differences (search for similar items in EconPapers)
JEL-codes: C23 K2 M15 M21 M48 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1515/rle-2023-0038

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