Short Run Effects of Generalized Data Protection Act on Returns from AI Acquisitions

The General Data Protection Regulation (GDPR), enacted in 2016, provides guidelines to firms on using personal customer information and empowers customers to know the ways firms use their data. We study the effect of GDPR on return on assets from acquisitions of AI technology companies. The objective of AI acquisitions matters after GDPR. Though firms obtain positive returns from AI acquisitions after GDPR, returns are low and weakly significant. However, returns are higher after GDPR for AI acquisitions that improve customer experience and cybersecurity. Returns from AI acquisitions to improve efficiency and product innovations are unchanged after GDPR. Revenue improvements and cost reductions from AI acquisitions are unaffected after GDPR. Our study documents AI acquisition strategies that can benefit firms after GDPR.