Market pressure or regulatory pressure? U.S. small bank pre-emptive IT investment to data privacy regulation

Jin Huang, Xiangyu Lin, Xiaomeng Shi and S. Sarah Zhang

Journal of Corporate Finance, 2025, vol. 95, issue C

Abstract: We assess small banks' responses to announcements of state-level proposals of Privacy Protection Acts (PPAs). Employing a Difference-in-Differences framework, we uncover the proactive actions taken by U.S. small banks in anticipation of these proposals. Our findings reveal that the announcement of PPA proposals leads to a 35.46% increase in IT investment by U.S. small banks, primarily driven by market pressure, with regulatory pressure playing a more limited role. Particularly, evidence suggests that banks with greater competitive threats from their rivals are motivated to enhance their IT investments due to market pressures. However, our research also finds that this surge in IT investment does not immediately translate into benefits for small banks.

Keywords: Regulation proposals; Data privacy; IT investment; Small banks; Cybersecurity risk (search for similar items in EconPapers)
JEL-codes: G21 G28 G31 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0929119925001312
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:95:y:2025:i:c:s0929119925001312

DOI: 10.1016/j.jcorpfin.2025.102863

Access Statistics for this article

Journal of Corporate Finance is currently edited by A. Poulsen and J. Netter

More articles in Journal of Corporate Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().