Corporate innovation, mergers and acquisitions, q theory of investment, behavioral finance
Journal of Accounting and Economics, 2022, 74 (1)
Using Patent Capital to Estimate Tobin's q
Price-Path Convexity and Short-Horizon Return Predictability (with Huseyin Gulen)
We find that the curvature of intramonth stock price paths contains significant return predictive power. Regardless of cumulative return in the month during which convexity is estimated, stocks with the least convex price paths subsequently outperform stocks with the most convex price paths. Our results are not driven by firm size, the bid-ask bounce, or other short-term return predictors. We find similar results in alternative samples and even at the aggregate market level. We provide evidence that this relation is driven by both liquidity shocks and behavioral biases at the firm level and by behavioral biases at the aggregate level.
Works in Progress
Patent Thickets and Mergers and Acquisitions (with Logan Emery)
We examine the relation between patent thickets and acquisitions. Patent thickets are dense webs of overlapping intellectual property rights and have been shown to increase patent commercialization costs. We find that firms are less likely to be acquired when they are in denser external thickets, which are thickets with patents owned by many firms and thereby expose firms to these costs. In contrast, firms are more likely to be acquired when they are in denser internal thickets, which are thickets with patents owned by one firm and thereby insulate firms from these costs. We also find that firms are more likely to be acquired when they are in the same external thicket as the acquirer, which enables firms to impose these costs directly on the acquirer. Overall, we provide evidence that patent thickets are an important consideration when acquiring innovation.