The American Inventors Protection Act: A Natural Experiment on Innovation Disclosure and the Cost of Debt

Hoffmann Arvid, Stefanie Kleimeier*, Nagihan Mimiroglu, Joost M.E. Pennings

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

Abstract

We examine the impact of innovation disclosure through patenting on firms’ cost of debt, focusing on the American Inventors Protection Act (AIPA) as an exogenous shock in innovation disclosure regulation. Post-AIPA, firms have an incentive to apply for patents only if commercial success is likely. Accordingly, we expect post-AIPA patents to be a better proxy for successful innovation activity, and thus to have a stronger effect on reducing the cost of debt than pre-AIPA patents. Indeed, we find that pre-AIPA patents reduce the cost of debt only for the most innovative firms, while post-AIPA, this effect holds for all firms.
Original languageEnglish
Pages (from-to)641-651
Number of pages11
JournalInternational Review of Finance
Volume19
Issue number3
Early online date10 Jan 2018
DOIs
Publication statusPublished - Sep 2019

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