The Cost of Big Data: Evaluating the Effects of the European Union’s General Data Protection Regulation

In the 1990’s the World Wide Web was created, drastically changing the way we do business, communicate, and live our lives. Ten years later in the early 2000’s the dot com boom happened, and several years later, new technology giants emerged—like Amazon, Google, and Facebook. From this, we now face “big data” that promises to solve world problems, but has the potential to create turmoil and malfeasance. My research examines the impact of the General Data Protection Regulation (GDPR) enacted in the EU in 2016 on firm value using Tobin’s Q and CARs. Using regression analyses, I observe that Tobin’s Q increases post GDPR for firms required to conform to the regulation. Moreover, I find that certain industries see more of an increase in firm value (e.g., Technology Services and Research & Consulting Services) compared to other industries. When I examine CARs, I observe an average return of +0.13% for the EU firms around the enactment date (5-day window). The implications of this analyses suggest that the GDPR enacted in the EU to ensure data privacy and protection increased consumer trust in business and positively impacted firm value.