Intellectual Property Protection and Financial Markets: Patenting vs. Secrecy

41 Pages Posted: 22 Jun 2018  

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

Steven Chong Xiao

University of Texas at Dallas - Naveen Jindal School of Management

Date Written: April 24, 2018

Abstract

We argue stronger patent protection encourages firms to rely less on secrecy to protect intellectual property, thereby enhancing transparency and reducing equity-financing frictions. We first show disclosure of patent information causally improves stock liquidity. A legislative change (AIPA), that accelerated disclosure of most patent applications (18-months after filing), enhances stock liquidity for firms with longer patent processing times. We then test our hypothesis by exploiting implementation of an international trade agreement (TRIPS) that strengthened patent protection. Firms, especially exporters to TRIPS-compliant countries, exhibit an increase in patenting, stock liquidity and equity financing, with less negative market response to equity-financing announcements.

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

JEL Classification: G14, G30, O31

Suggested Citation

Dass, Nishant and Nanda, Vikram K. and Xiao, Steven Chong, Intellectual Property Protection and Financial Markets: Patenting vs. Secrecy (April 24, 2018). Georgia Tech Scheller College of Business Research Paper No. 18-25. Available at SSRN: https://ssrn.com/abstract=3200854 or http://dx.doi.org/10.2139/ssrn.3200854

Nishant Dass

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 (Contact Author)

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

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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