Privacy policies and consumer data extraction: evidence from US firms
File(s)
Published version
Author(s)
Ramadorai, Tarun
Uettwiller, Antoine
Walther, Ansgar
Type
Journal Article
Abstract
Using a comprehensive dataset of privacy policies, firm characteristics, consumer tracking, and cybersecurity incidents, we document several stylized facts about the
heterogeneity of firms’ data extraction practices and the influence of privacy regulations. Rather than adopting standardized boilerplate privacy policies, we find substantial within-industry differences correlated with firms’ technical sophistication; firms engaging in data extraction have lengthier policies, seeking to hedge legal risks. Firms with intermediate technical sophistication appear to follow a ”collect and share” model, collecting large amounts of consumer data and sharing it with third-parties for processing, thus creating cybersecurity risks. Conversely, high sophistication firms appear to implement a “receive and process” model, consistent with a two-tier data market in which data flows from intermediate to high sophistication firms.
heterogeneity of firms’ data extraction practices and the influence of privacy regulations. Rather than adopting standardized boilerplate privacy policies, we find substantial within-industry differences correlated with firms’ technical sophistication; firms engaging in data extraction have lengthier policies, seeking to hedge legal risks. Firms with intermediate technical sophistication appear to follow a ”collect and share” model, collecting large amounts of consumer data and sharing it with third-parties for processing, thus creating cybersecurity risks. Conversely, high sophistication firms appear to implement a “receive and process” model, consistent with a two-tier data market in which data flows from intermediate to high sophistication firms.
Date Issued
2025-09-01
Date Acceptance
2025-01-22
Citation
Review of Finance, 2025, 29 (5), pp.1337-1367
ISSN
1382-6662
Publisher
Oxford University Press (OUP)
Start Page
1337
End Page
1367
Journal / Book Title
Review of Finance
Volume
29
Issue
5
Copyright Statement
© The Author(s) 2025. Published by Oxford University Press on behalf of the European Finance Association. This is an Open Access article distributed under the terms of the Creative Commons Attribution License (https:// creativecommons.org/licenses/by/4.0/), which permits unrestricted reuse, distribution, and reproduction in any medium, provided the original work is properly cited.
License URL
Publication Status
Published
Date Publish Online
2025-06-23