Do Analysts Fully Reflect Information in Patents about Future Earnings?

Jaimin Goh, Jaehong Lee, Wonchang Hur and Yunchang Ju
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Jaimin Goh: College of Business Administration, Inha University, Incheon 22212, Korea
Jaehong Lee: College of Business, Sangmyung University, Seoul 03016, Korea
Wonchang Hur: College of Business Administration, Inha University, Incheon 22212, Korea
Yunchang Ju: College of Business Administration, Inha University, Incheon 22212, Korea

Sustainability, 2019, vol. 11, issue 10, 1-17

Abstract: This study investigates the relationship between a firm’s intellectual property (measured by patents) and its future business performance and information environments by focusing on financial analysts’ forecasting behavior. The results show that patent citations have more influence on future profitability than patent counts and financial analysts pay more attention to firms with patent citations by showing higher followings for those firms. However, the findings also suggest that analyst forecasts do not fully reflect the implications of the effect of patent citations on future earnings and this under-valuation can mislead investors. Thus, we conclude that financial analysts ‘partially’ improve the information environment in terms of patent citations.

Keywords: patent citations; patent counts; business performance; analyst followings; analysts’ forecasting activities (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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