Investor Short-termism and Intellectual Property Infringement

41 Pages Posted: 29 Jul 2022 Last revised: 15 Nov 2023

See all articles by Po-Hsuan Hsu

Po-Hsuan Hsu

National Tsing Hua University - Department of Quantitative Finance; National University of Singapore (NUS) - Asian Bureau of Finance and Economic Research (ABFER)

Carl Hsin-han Shen

Macquarie University, Macquarie Business School

Yanzhi Wang

National Taiwan University - Department of Finance

Date Written: November 15, 2023

Abstract

Using a comprehensive database of infringement cases involving patents, trademarks, and trade secrets, we show that firms’ frequency and likelihood of being sued for infringement increase with short-term institutional ownership. We use both a quasi-natural experiment of mergers between financial institutions and instrumental variable regressions based on fund flows to support a causal effect of shareholders’ short-termism on infringement. The likelihood of injunctions granted by courts and the chance of being entangled in prolonged lawsuits also increase with short-term institutional ownership. Our results suggest that these investors urge managers to aggressively pursue new product areas, which likely leads to legal disputes.

Keywords: short-term institutional investors; intelligent property infringement; trademarks; patents.

JEL Classification: G23, G30, O30

Suggested Citation

Hsu, Po-Hsuan and Shen, Carl Hsin-han and Wang, Yanzhi, Investor Short-termism and Intellectual Property Infringement (November 15, 2023). Available at SSRN: https://ssrn.com/abstract=4171952 or http://dx.doi.org/10.2139/ssrn.4171952

Po-Hsuan Hsu (Contact Author)

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

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

National University of Singapore (NUS) - Asian Bureau of Finance and Economic Research (ABFER) ( email )

BIZ 2 Storey 4, 04-05
1 Business Link
Singapore, 117592
Singapore

Carl Hsin-han Shen

Macquarie University, Macquarie Business School ( email )

New South Wales 2109
Australia

Yanzhi Wang

National Taiwan University - Department of Finance ( email )

1, Sec. 4, Roosevelt Road
Taipei, 106
Taiwan

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