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
Date Written: December 21, 2018
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: Suggested Citation