No Weal Without Woe: Implementation of Personal Data Protection Systems and Corporate Value

Abstract

The commercial exploitation of personal information has raised concerns regarding privacy, illegal data use, and information security, among others. Therefore, personal data protection systems (PDPS) play a significant role, and corporations are the primary enforcers of these systems’ regulation. However, PDPS require significant investment from companies, and there is no consensus regarding the economic outcomes of establishing these systems. This study investigates whether the establishment of PDPS affects short-term financial performance and long-term corporate value. After applying the propensity score matching method, a dataset comprising 912 firm-year observations of e-commerce companies listed on the Shanghai and Shenzhen Stock Exchanges from 2008 to 2020 was selected. The results show that PDPS implementation can improve a company’s short-term financial performance by a) exploring markets and strengthening internal control and b) increase long-term corporate value by strengthening corporate social responsibility. This study offers insights for companies to proactively implement PDPS and strengthen their management of personal data, thereby boosting the overall corporate value. In addition, this study can help governments to develop legislation on national information security and enhance international cooperation, especially for emerging markets.