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Court Decisions and Equity Markets: Estimating the Value of Copyright Protection

  • Matthew J. Baker


    (United States Naval Academy)

  • Brendan M. Cunningham


    (United States Naval Academy)

We use a novel database on U. S. federal court decisions to measure the changes in the state of copyright protection in both statute and case law. We combine an index of copyright breadth derived from this database with a quarterly panel of firms in creative industries over the years 1986-1998. Using this data, we measure the impact of changes in the breadth of copyright on the market valuation of firm equity. We maintain the assumption that equity markets will incorporate the value of copyright innovations into the price of equity. After controlling for a variety of fundamental determinants of ¯rm-level excess returns to equity, we find that a court case broadening copyright is associated with a statistically significant 23-45 basis points increase in a firm's excess return. Our results obtain across both 4-5 year sub-samples and the size distribution of firms.

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Paper provided by United States Naval Academy Department of Economics in its series Departmental Working Papers with number 4.

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Length: 31 pages
Date of creation: Mar 2004
Date of revision:
Handle: RePEc:usn:usnawp:4
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  1. Kai-Lung Hui, 2002. "On the Supply of Creative Work: Evidence from the Movies," American Economic Review, American Economic Association, vol. 92(2), pages 217-220, May.
  2. Louis K.C. Chan & Josef Lakonishok & Theodore Sougiannis, 1999. "The Stock Market Valuation of Research and Development Expenditures," NBER Working Papers 7223, National Bureau of Economic Research, Inc.
  3. Towse, Ruth, 1999. "Copyright and Economic Incentives: An Application to Performers' Rights in the Music Industry," Kyklos, Wiley Blackwell, vol. 52(3), pages 369-90.
  4. Stanley M. Besen & Leo J. Raskind, 1991. "An Introduction to the Law and Economics of Intellectual Property," Journal of Economic Perspectives, American Economic Association, vol. 5(1), pages 3-27, Winter.
  5. Novos, Ian E & Waldman, Michael, 1984. "The Effects of Increased Copyright Protection: An Analytic Approach," Journal of Political Economy, University of Chicago Press, vol. 92(2), pages 236-46, April.
  6. Thomas J. Miceli & Richard P. Adelstein, 2005. "An Economic Model of Fair Use," Working papers 2005-56, University of Connecticut, Department of Economics.
  7. B. Zorina Khan & Kenneth L. Sokoloff, 2001. "The Early Development of Intellectual Property Institutions in the United States," Journal of Economic Perspectives, American Economic Association, vol. 15(3), pages 233-246, Summer.
  8. Kranenburg Hans van & Hogenbrink Annelies, 2003. "Determinants of Multimedia, Entertainment, and Business Software Copyright Piracy: A Cross-national Study," Research Memorandum 039, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
  9. Johnson, William R, 1985. "The Economics of Copying," Journal of Political Economy, University of Chicago Press, vol. 93(1), pages 158-74, February.
  10. Landes, William M & Posner, Richard A, 1989. "An Economic Analysis of Copyright Law," The Journal of Legal Studies, University of Chicago Press, vol. 18(2), pages 325-63, June.
  11. Eric Chiang & Djeto Assane, 2002. "Software copyright infringement among college students," Applied Economics, Taylor & Francis Journals, vol. 34(2), pages 157-166.
  12. Stan J. Liebowitz & Stephen E. Margolis, 2005. "Seventeen Famous Economists Weigh In On Copyright: The Role Of Theory, Empirics, And Network Effects," Law and Economics 0505003, EconWPA.
  13. Rick Harbaugh & Rahul Khemka, . "Does Copyright Enforcement Encourage Piracy?," Claremont Colleges Working Papers 2000-14, Claremont Colleges.
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