Are Scientific Indicators of Patent Quality Useful to Investors?

29 Pages Posted: 4 Nov 2005

See all articles by Mark Hirschey

Mark Hirschey

University of Kansas

Vernon J. Richardson

University of Arkansas at Fayetteville

Abstract

Together with the number of patents and the value of R&D expenditures, scientific measures of patent quality give investors a useful basis upon which to judge the economic merit of the firm's inventive and innovative activity. Especially in the case of small cap and relatively low P/E high tech companies, we find a favorable stock-price influence when both the number of patents, the scientific merit of those patents, and R&D spending is high. Patent quality information also appears germane in the case of large cap high-tech companies with relatively high P/E ratios. In short, patent citation information may indeed help investors judge the future profit-earning potential of a firm's scientific discoveries.

Keywords: Patents, patent citations, market value, research and development

JEL Classification: G12, G31, O31, O32

Suggested Citation

Hirschey, Mark and Richardson, Vernon J., Are Scientific Indicators of Patent Quality Useful to Investors?. Journal of Empirical Finance, Vol. 11, No. 1 pp. 91-107, February 2004, Available at SSRN: https://ssrn.com/abstract=832024

Mark Hirschey (Contact Author)

University of Kansas ( email )

School of Business
1300 Sunnyside Ave.
Lawrence, KS 66045-7585
United States
785-864-7563 (Phone)
785-864-5328 (Fax)

HOME PAGE: http://www.business.ku.edu/gen/bschool_generated_pages/Hirschey_Mark_p2272.html

Vernon J. Richardson

University of Arkansas at Fayetteville ( email )

401 WCOB
Fayetteville, AR 72701
United States

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