Fool Me Twice? Data Breach Reductions Through Stricter Sanctions

23 Pages Posted: 31 Oct 2018 Last revised: 21 Jul 2019

See all articles by Joseph Buckman

Joseph Buckman

Georgia State University

Matthew J. Hashim

University of Arizona

Tiemen Woutersen

University of Arizona - Department of Economics

Jesse Bockstedt

University of Arizona - Department of Management Information Systems

Date Written: July 19, 2019

Abstract

Data breach notification laws in the United States mandate firms to take remedial actions when consumer data is compromised. Interestingly, the policies contained within these laws vary by state and by year of law enactment. We investigate the effects of the various policies to determine how firms respond to the implementation of data breach notification laws. Drawing upon institutional and deterrence theory, we hypothesize that firms facing stricter sanctions resulting from a data breach will experience fewer subsequent breaches in comparison to other firms. We create a unique panel data set using breach information collected between 2005 and 2016 to estimate several panel regressions with fixed effects. Our results show that policies that increase the costs associated with a data breach reduce a firm’s subsequent breaches by up to 50%, depending on the policy. Our findings are consistent across several robustness models and offer unique theoretical contributions to the information security literature as well as practical contributions to policymakers and security experts.

Keywords: data breach, deterrence, information security, econometrics, panel data

Suggested Citation

Buckman, Joseph and Hashim, Matthew J. and Woutersen, Tiemen and Bockstedt, Jesse, Fool Me Twice? Data Breach Reductions Through Stricter Sanctions (July 19, 2019). Available at SSRN: https://ssrn.com/abstract=3258599 or http://dx.doi.org/10.2139/ssrn.3258599

Joseph Buckman

Georgia State University ( email )

35 Broad St NW
Atlanta, GA 30303
United States

Matthew J. Hashim (Contact Author)

University of Arizona ( email )

Department of Management Information Systems
Eller College of Management
Tucson, AZ 85721
United States

Tiemen Woutersen

University of Arizona - Department of Economics ( email )

McClelland Hall
Tucson, AZ 85721-0108
United States

Jesse Bockstedt

University of Arizona - Department of Management Information Systems ( email )

AZ
United States

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