Does consumer privacy act influence firm performance in the retail industry? Evidence from a US state-level law change

In recent years, US states have introduced or passed consumer privacy laws. We explore the passage (June 28, 2018) and enforcement (January 1, 2020) of the California Consumer Privacy Act (CCPA) to ask whether such laws influence firm valuation. Based on organizational complexity and intangibility frameworks in the marketing literature, the law's passage on June 28, 2018 did not have a meaningful stock market reaction in a sample of retail firms. Firms with higher intangibility or those with higher complexity and intangibility realized positive cumulative abnormal returns and Buy-and-Hold Abnormal Returns (BHAR). The findings are consistent after controlling for the text-based measures of privacy agreements, alternative measures of intangibility, and other robustness checks. Using the January 1, 2020, enforcement date, there were no meaningful changes in bounce rates and traffic from desktops or mobiles. The findings carry implications for policy makers, practitioners, and consumers.