UBC Theses and Dissertations
Essays on disclosure of intangible assets Zheng, Yuxiang
This dissertation comprises two studies on the voluntary disclosures of intangible assets. The past decades have witnessed the increasing economic importance of corporate innovation. Yet, innovation-related information is relatively limited in accounting reports for the capital market. This dissertation investigates firms’ voluntary disclosure of their R&D outputs through channels outside the financial reporting system: patent documents and corporate scientific publications. Chapter 2 examines the informativeness of patent documents in assessing firm value. As milestones of firms’ innovation process, patents periodically summarize the outputs of firms’ innovation activities. I leverage two text-based characteristics of a patent document to measure its information content—linguistic tone and the number of independent claims. Using large-sample patent documents granted by the U.S. Patent and Trademark Office, I find that these two characteristics can predict up to 7 years' future earnings. This predictive power is incremental to R&D expenses information from the accounting reports. Furthermore, the stock market reacts positively, but under-reacts, to information in patent documents at the release. This chapter demonstrates that the patent disclosure system is an alternative information source of firms’ internally developed intangibles outside the financial reporting system. Chapter 3, co-authored with Professor Jenny Li Zhang, studies corporate voluntary R&D disclosure through scientific publications around the enactment of the Leahy-Smith America Invents Act of 2011 (AIA). The AIA switches the patent system from “first-to-invent” to “first-inventor-to-file” system. This change invalidates private records as evidence for patent grants and induces a patent “race”: post-AIA patent grants largely depend on the speed of “filing” applications with the patent office, rather than on whether a firm is the original inventor. Firms with resource constraints could be slow in filing a patent and are disadvantaged in this race. Using a difference-in-differences design, we show that highly leveraged firms increase scientific publications to extend the patent race and/or block competitors from obtaining a patent after the enactment of AIA. The findings suggest that patent legislation is a crucial determinant of firms’ scientific publications. The positive effect of the AIA on corporate scientific publications is consistent with the policy makers’ goal to promote knowledge spillover in society.
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