Regulation as Opportunity: Proactive Gdpr Compliance in the U.S. Credit Intermediation Industry

37 Pages Posted: 3 Apr 2024

See all articles by Sam (Ruiqing) Cao

Sam (Ruiqing) Cao

Stockholm School of Economics

Tobias Kretschmer

Ludwig Maximilian University of Munich (LMU) - Faculty of Business Administration (Munich School of Management); Centre for Economic Policy Research (CEPR)

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Abstract

We study the impact of the European Union’s General Data Protection Regulation (GDPR) on US Fortune 500 corporations in the credit intermediation industry. We find that firms with more than 1% EU market presence experienced 24% higher growth in operating incomes than primarily US-based firms. This effect was identified soon after GDPR was announced, consistent with proactive compliance by firms in an already heavily regulated sector. Post-hoc analyses of survey data suggest that exposure to GDPR correlated with reduced data platform usage, increased data standardization, and more ML/AI innovation five years after the regulation was introduced. These results suggest that GDPR may have spurred firms to improve internal data handling practices, which led to non-transitory operational efficiency gains. Overall, regulatory requirements can help large traditional firms overcome organizational inertia by aligning stakeholder interests around committing to short-run costs and making necessary adjustments to achieve long-run benefits.

Keywords: GDPR, Proactive Compliance, Data, Digital Transformation, Financial Services

Suggested Citation

Cao, Ruiqing and Kretschmer, Tobias, Regulation as Opportunity: Proactive Gdpr Compliance in the U.S. Credit Intermediation Industry. Available at SSRN: https://ssrn.com/abstract=4783392 or http://dx.doi.org/10.2139/ssrn.4783392

Ruiqing Cao

Stockholm School of Economics ( email )

PO Box 6501
Stockholm, 11383
Sweden

Tobias Kretschmer (Contact Author)

Ludwig Maximilian University of Munich (LMU) - Faculty of Business Administration (Munich School of Management) ( email )

Kaulbachstr. 45
Munich, DE 80539
Germany

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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