Patent Disclosures and Capital Market Feedback

The paper presented in this PRICE Seminar examines how patent disclosures affect managerial learning. Exploiting the American Inventor’s Protection Act (AIPA) as a shock that accelerated disclosure, the paper documents an increase in investment-Q sensitivity among firms that revealed information more quickly after AIPA’s introduction. This effect is more pronounced for smaller firms, firms with lower analyst coverage, and firms associated with greater information asymmetry. The findings suggest that AIPA enhanced capital market feedback, thereby shaping managerial decision-making.