An Empirical Analysis of the Signaling Effect of a Privacy Seal: The Case of PrivacyMark in Japan

Abstract

Privacy has become increasingly important with the rise in the use of personal data; however, firms have unfairly low incentives to protect customer privacy because the Personal Information Protection Law in Japan does not guarantee privacy protection. This paper aims to examine firms’ assumptions about the attitude of Japanese consumers to privacy and of entruster to personal data protection by investigating the websites of firms certified by PrivacyMark, which is a kind of privacy seal. Further, we test the statistical hypothesis that a firm earning a higher additional profit by displaying the PrivacyMark is more likely to aggressively appeal for its acquisition. The results of the empirical analysis using statistical methods do not lend support to the hypothesis for business-to-consumer (B2C) transactions, but does so for business-to-business (B2B) transactions. The results suggest that firms assume Japanese consumers to have insufficient concern regarding privacy, whereas entruster to prioritize personal data protection.