Does Knowledge Protection Benefit Shareholders? Evidence from Stock Market Reaction and Firm Investment in Knowledge Assets

50 Pages Posted: 5 Feb 2016 Last revised: 20 Oct 2016

Buhui Qiu

University of Sydney Business School; Financial Research Network (FIRN)

Teng Wang

Board of Governors of the Federal Reserve System

Multiple version iconThere are 2 versions of this paper

Date Written: May 1, 2016

Abstract

This paper studies whether knowledge protection affects shareholder value and firms’ investment in knowledge assets using the staggered adoptions and rejections of the inevitable disclosure doctrine (IDD) by U.S. state courts as exogenous changes in the level of knowledge protection. We find positive (negative) abnormal stock returns around the IDD adoption (rejection) day for firms headquartered in the state and uncover a positive IDD treatment effect on firms’ investment in knowledge assets. Moreover, the effects on stock returns and knowledge-assets investment are stronger in more knowledge-oriented states, industries, and firms. Finally, enhancing knowledge protection does not discourage local entrepreneurial activity.

Keywords: Knowledge Protection; Inevitable Disclosure Doctrine; Shareholder Value; Investment in Knowledge Assets

JEL Classification: K11, G14, G31

Suggested Citation

Qiu, Buhui and Wang, Teng, Does Knowledge Protection Benefit Shareholders? Evidence from Stock Market Reaction and Firm Investment in Knowledge Assets (May 1, 2016). FIRN Research Paper No. 2728108. Available at SSRN: https://ssrn.com/abstract=2728108 or http://dx.doi.org/10.2139/ssrn.2728108

Buhui Qiu (Contact Author)

University of Sydney Business School ( email )

Room 513, The Codrington Building
The University of Sydney
Sydney, NSW 2006
Australia
+61 2 9036 6435 (Phone)
+61 2 9351 6461 (Fax)

HOME PAGE: http://sydney.edu.au/business/staff/buhuiq

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

Teng Wang

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

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