Can the establishment of a personal data protection system promote firm value? An exploration of the economics of privacy

This study refines the economics of privacy and explores the impact of personal privacy protection on the sustainable development of enterprises. The findings provide a valuable reference for governments to optimize existing personal privacy policies, and provide guidance for enterprises to manage data property rationally and improve firm value. This study introduces a novel approach by creating a dynamic model involving incomplete information, which includes businesses, consumers, and the government, to theoretically elucidate how establishing a personal data protection system can enhance the market value of enterprises. Additionally, this study seeks to determine the minimum government-imposed fines and likelihood of inspections necessary to reduce the incentive for enterprises to falsify data when they do not protect them. The subsequent empirical analysis uses data from 2011 to 2020 to verify the theoretical hypothesis. Further analysis explores the driving effects that not only originate from the independent intrinsic value of establishing a personal data protection system, but also rely on social trust enhancement, market share expansion, and institutional investor preference mechanisms. Moreover, the market value enhancement effects resulting from enterprises' privacy protection measures are more pronounced in enterprises characterized by data insensitivity, industry chain upstream, and competitive industries. The government's data governance, including public data openness and digital government construction, generates multiplier effects.