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Patent quality, firm value, and investor underreaction: Evidence from patent examiner busyness

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  • Shu, Tao
  • Tian, Xuan
  • Zhan, Xintong

Abstract

This paper attempts to study the causal effect of examiner busyness on patent quality and firm value. Using a broad set of patent quality measures, we find strong evidence that patents allowed by busy examiners exhibit significantly lower quality. Further, examiner busyness of firms’ patents negatively predicts the firms’ future stock returns, which is consistent with investor underreaction to examiner busyness. Examiners’ experience helps attenuate the negative effect of examiner busyness.

Suggested Citation

  • Shu, Tao & Tian, Xuan & Zhan, Xintong, 2022. "Patent quality, firm value, and investor underreaction: Evidence from patent examiner busyness," Journal of Financial Economics, Elsevier, vol. 143(3), pages 1043-1069.
    • Handle: RePEc:eee:jfinec:v:143:y:2022:i:3:p:1043-1069
    DOI: 10.1016/j.jfineco.2021.10.013
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    More about this item

    Keywords

    Patent quality; Examiner busyness; Stock returns; Investor underreaction;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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