Does Information Bundling Enhance or Impede Managerial Learning from Capital Markets?

Abstract

Market reactions to the announcement of firm-specific information can be informative for managerial decision making. We examine whether managers' ability to gather decision-relevant information from market reactions is affected by information bundling. Using exogenous variation in the number and technological similarity of patents granted at the same time as a measure of information bundling, we show that the market reaction to patent grants is more informative for managerial decisions if fewer or more similar patents are released on the same day. This effect is stronger for patents that relate to more exploratory innovative strategies for which feedback is more important. Firms with more separate information releases also produce more valuable and higher quality innovations in the future. Taken together, our results suggest that bundling the release of multiple pieces of information 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, O30