Joint Meeting of the Mid-Atlantic and Northeast Regions

Accelerated Dissemination of Patenting Information Increases Crash Risk: Evidence from the American Inventor’s Protection Act

• In Event: Corporate Disclosure

Abstract

Employing the American Inventor’s Protection Act (AIPA) that accelerated the publication of patent applications, we find that accelerated dissemination of patenting information increases stock price crash risk. This effect is stronger when treated firms are technologically closer to their rival firms and more concerned about proprietary costs. Further analyses indicate that, the heightened crash risk following the AIPA is attributable to managers shifting towards less timely bad news disclosures. Overall, we document that accelerated dissemination of patenting information induces managers to strategically withhold negative information, leading to unintended consequences in the stock market.

Authors

• Kose John, New York University

• Xiaoran Ni, Xiamen University

• Chi Zhang, UMass Lowell