Simultaneous Information Releases and Capital Market Feedback

Abstract

We examine whether the simultaneous release of information affects managers' ability to gather decision-relevant information from market prices. We use the plausibly exogenous timing of patent grant disclosures by the United States Patent and Trademark Office as a source of variation in the simultaneous release of value-relevant information. We find that the market's response to patent grants is more informative for managerial decisions if the firm receives fewer patent grants on the same day. This effect is more pronounced for patents that relate to relatively more risky innovative strategies for which feedback is arguably more important. Firms with more distinct information releases also produce more valuable and higher quality innovations in the future. Our results suggest that bundling the release of multiple pieces of information at once potentially impedes managers' ability to benefit from the market's feedback.

Keywords: Information bundling, Information release, Patent disclosure, Patent grant, Capital market feedback, Corporate innovation, Corporate investment, Managerial learning

JEL Classification: D83, G14, M40, O3