The Impact of Federal and State Notification Laws on Security Breach Announcements

Firms are under increasing regulatory pressures to protect consumers' confidential information. The focus of this article is to examine the impact of federal and state breach notification laws in coaxing organizations to improve security of customers' confidential information. Specifically, we use event-study methodology to examine the impact of security breach announcements on the market value of firms during the period before and after the enactment of this legislation. Our results show that the negative impacts of security breach announcements on stock prices have been reduced significantly after the enactment of federal and state security breach notification laws.