Economics at your fingertips  

How do institutional investors respond to patent announcements?

Viktoriya Lantushenko and Edward F. Nelling

Managerial Finance, 2018, vol. 44, issue 12, 1446-1465

Abstract: Purpose - The purpose of this paper is to examine institutional investor demand for shares of firms that announce patents. Design/methodology/approach - There are three important dates in the process of obtaining a patent. First, a patent filer requests the right for intellectual property on the application date. Next, the content of a patent becomes publicly available on the publication date, if authorized by the US Patent and Trademark Office. Third, once the patent is validated, it is issued on the grant date. The authors focus on the publication date, as it marks the time when the patent-specific information is disclosed to public. In a regression framework, the authors analyze how institutional investors respond to patent publications. Findings - The authors document a significant increase in institutional demand for a firm’s shares around patent announcements. Institutional investors react more strongly to patent publications announced by firms that have published frequently in the past. The increase in demand is also greater when the firm’s shareholder base consists of a higher percentage of long-term institutions. Institutional trading around patent announcements is associated with higher levels of stock price informativeness. In addition, firms that announce patents exhibit long-term outperformance relative to a control sample. Overall, the results suggest that institutional trading conveys information about the value of patents. Originality/value - This study is the first to explore changes in institutional demand around patent publications and to show that such events attract institutional investors and have an impact on shareholder wealth, price informativeness and liquidity.

Keywords: Institutional investors; Patents (search for similar items in EconPapers)
Date: 2018
References: Add references at CitEc
Citations: Track citations by RSS feed

Downloads: (external link) ... RePEc&WT.mc_id=RePEc (text/html)
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Ordering information: This journal article can be ordered from
Emerald Group Publishing, Howard House, Wagon Lane, Bingley, BD16 1WA, UK
http://emeraldgroupp ... s/journals.htm?id=mf

Access Statistics for this article

Managerial Finance is currently edited by Professor Don T Johnson

More articles in Managerial Finance from Emerald Group Publishing
Bibliographic data for series maintained by Virginia Chapman ().

Page updated 2019-03-02
Handle: RePEc:eme:mfipps:mf-12-2017-0536