Intellectual Property Protection and Financial Markets: Patenting vs. Secrecy

44 Pages Posted: 21 Aug 2015 Last revised: 30 May 2019

See all articles by Nishant Dass

Nishant Dass

Georgia Institute of Technology - Scheller College of Business

Vikram K. Nanda

University of Texas at Dallas - School of Management - Department of Finance & Managerial Economics

Haemin Dennis Park

University of Texas at Dallas

Steven Chong Xiao

University of Texas at Dallas - Naveen Jindal School of Management

Date Written: May 2019

Abstract

Firms rely on patenting and secrecy to protect intellectual property. We study how changes in the tradeoff between patenting and secrecy affect firms' stock liquidity and financing outcomes. We show that implementation of an international trade agreement (TRIPS) that strengthened patent protection led to more patenting, accompanied by improvement in the stock liquidity of firms in exporting industries that are reliant on patents. This in turn enhanced the ability of affected firms to raise equity capital and reduce leverage. Our results suggest that policies that promote greater use of patenting over secrecy can help reduce informational frictions in equity markets.

Keywords: Patents, Intellectual Property, Stock Liquidity, TRIPS, AIPA

JEL Classification: G14, G30, O31

Suggested Citation

Dass, Nishant and Nanda, Vikram K. and Park, Haemin Dennis and Xiao, Steven Chong, Intellectual Property Protection and Financial Markets: Patenting vs. Secrecy (May 2019). Available at SSRN: https://ssrn.com/abstract=2648770 or http://dx.doi.org/10.2139/ssrn.2648770

Nishant Dass (Contact Author)

Georgia Institute of Technology - Scheller College of Business ( email )

800 West Peachtree St.
Atlanta, GA 30308
United States
404-894-5109 (Phone)

HOME PAGE: http://scheller.gatech.edu/dass

Vikram K. Nanda

University of Texas at Dallas - School of Management - Department of Finance & Managerial Economics ( email )

2601 North Floyd Road
P.O. Box 830688
Richardson, TX 75083
United States

Haemin Dennis Park

University of Texas at Dallas

2601 North Floyd Road
Richardson, TX 75083
United States

Steven Chong Xiao

University of Texas at Dallas - Naveen Jindal School of Management ( email )

P.O. Box 830688
Richardson, TX 75083-0688
United States

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