From Financial Innovation to Brand Innovation: How Options Trading Affects the Launch and Failure of Trademarks

66 Pages Posted: 15 Jan 2018 Last revised: 28 Dec 2018

See all articles by Po-Hsuan Hsu

Po-Hsuan Hsu

National Tsing Hua University - Department of Quantitative Finance

Fengfei Li

Deakin University - Faculty of Business and Law

Yoshio Nozawa

Hong Kong University of Science and Technology

Date Written: December 21, 2018

Abstract

This study examines the impact of option listing and trading on firms’ brand innovation using the U.S. trademark database. We find that higher option volume not only increases brand innovation measured by newly launched trademarks, but also increases the failure likelihood of these trademarks. These results are supported by difference-in-differences regressions based on two quasi-natural experiments using option listing standards and the Penny Pilot Program. The positive effect of option volume on trademark failure likelihood is more pronounced for firms with more entrenched management. These findings are explained by managers’ risk-taking, rather than improved price efficiency.

Keywords: option trading; trademark; brand innovation

JEL Classification: G12, G34, O31, O34

Suggested Citation

Hsu, Po-Hsuan and Li, Fengfei and Nozawa, Yoshio, From Financial Innovation to Brand Innovation: How Options Trading Affects the Launch and Failure of Trademarks (December 21, 2018). Available at SSRN: https://ssrn.com/abstract=3101881 or http://dx.doi.org/10.2139/ssrn.3101881

Po-Hsuan Hsu

National Tsing Hua University - Department of Quantitative Finance ( email )

101, Section 2, Kuang-Fu Road
Hsinchu, Taiwan 300
China

Fengfei Li (Contact Author)

Deakin University - Faculty of Business and Law ( email )

Burwood, Victoria 3215
Australia

Yoshio Nozawa

Hong Kong University of Science and Technology ( email )

Clearwater Bay Road
Sai Kun, NT
Hong Kong

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