We demonstrate that a firm's ability to innovate is predictable, persistent, and relatively simple to compute, and yet the stock market appears to ignore the implications of past successes when valuing future innovation. We show that two firms that invest the same in R&D can have quite divergent, but predictably divergent, future paths based on their past track records. A long-short portfolio strategy that takes advantage of the information in past track records earns abnormal returns of roughly 11% annually. Importantly, these past track records also predict divergent future real outcomes in patents, patent citations, and new product innovations.
We study the impact of social networks on agents' ability to gather superior information about firms. Exploiting novel data on the educational backgrounds of sell-side equity analysts and senior officers of firms, we test the hypothesis that analysts' school ties to senior officers impart comparative information advantages in the production of analyst research. We find evidence that analysts outperform on their stock recommendations when they have an educational link to the company. A simple portfolio strategy of going long the buy recommendations with school ties and going short buy recommendations without ties earns returns of 5.40% per year. We test whether Regulation FD, targeted at impeding selective disclosure, constrained the use of direct access to senior management. We find a large effect: pre-Reg FD the return premium from school ties was 8.16% per year, while post-Reg FD the return premium is nearly zero and insignificant.
We test the hypothesis that sell-side analysts engage in acts of reciprocity when issuing stock recommendations, in exchange for managerial favor-rendering. We identify an observable channel of favor rendering: the appointment of analysts to the boards of directors of firms they formerly covered. We investigate the behavior of board appointed analysts during the time period when they covered these firms, and find that analysts issue significantly more positive recommendations on companies for whom they end up on the board of directors. The magnitude of this result is large: 80.2% of reciprocal recommendations are strong-buy/buy recommendations, compared to 56.9% for all other analyst recommendations. We find that reciprocal analysts' positive bias is stronger at precisely those times when firms' benefits are larger, and provide estimates of the value of these acts of reciprocity to both the firm and the analyst involved.
The article discusses research findings on the effects of patent trolling on the U.S. economy and presents statistics on the costs of patent litigation, reduced investment in research and development, and declines in venture investing.
This paper finds evidence of return predictability across economically linked firms. We test the hypothesis that in the presence of investors subject to attention constraints, stock prices do not promptly incorporate news about economically related firms, generating return predictability across assets. We use a dataset of firms’ principal customers to identify a set of economically related firms, and show that stock prices do not incorporate news involving related firms, generating predictable subsequent price moves. A long/short equity strategy based on this effect yields monthly alphas of over 150 basis points.
We develop a theoretical model of, and provide the first large-sample evidence on, the behavior and impact of non-practicing entities (NPEs) in the intellectual property space. Our model shows that NPE litigation can reduce infringement and support small inventors. However, the model also shows that as NPEs become effective at bringing frivolous lawsuits, the resulting defense costs inefficiently crowd out firms that, absent NPEs, would produce welfare-enhancing innovations without engaging in infringement. Our empirical analysis shows that on average, NPEs behave as opportunistic patent trolls. NPEs sue cash-rich firms ― a one standard deviation increase in cash holdings roughly doubles a firm's chance of being targeted by NPE litigation. We find moreover that NPEs target cash unrelated to the alleged infringement at essentially the same frequency as they target cash related to the alleged infringement. By contrast, cash is neither a key driver of intellectual property lawsuits by practicing entities (e.g., IBM and Intel), nor of any other type of litigation against firms. We find further suggestive evidence of NPE opportunism, such as forum shopping and targeting of firms that have reduced ability to defend themselves against litigation. We find that NPE litigation has a real negative impact on innovation at targeted firms: firms substantially reduce their innovative activity after settling with NPEs (or losing to them in court). Moreover, we neither find any markers of significant NPE pass-through to end innovators, nor of a positive impact of NPEs on innovation in the industries in which they are most prevalent.
AB026. SOH22ABS096. Any port in a storm?—Tips and tricks from the surgical toolkit of robotic, transanal total mesorectal excision (TaTME), laparoscopic and open approaches to access a rectal stump in a frozen pelvis
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