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Patents and corporate credit risk

Frey, Carl Benedikt LU ; Neuhausler, Peter and Blind, Knut (2019) In Industrial and Corporate Change
Abstract
A vast literature documents a positive relationship between patents and companies stock market performance. Nevertheless, evidence on the influence of patents on companies’ debt capacity remains sparse. In this article, we examine the relationship between companies’ patent portfolios and their credit rating, providing relevant, albeit indirect, evidence on patents as a debt funding mechanism. Using a panel dataset on 155 U.S. firms, we find a positive relationship between companies’ credit rating and the size of their patent portfolio. Our indicators for valuable patents, however, provide a mixed picture. While there is a positive link between the average family size of a company’s patent portfolio and its credit ratings, we surprisingly... (More)
A vast literature documents a positive relationship between patents and companies stock market performance. Nevertheless, evidence on the influence of patents on companies’ debt capacity remains sparse. In this article, we examine the relationship between companies’ patent portfolios and their credit rating, providing relevant, albeit indirect, evidence on patents as a debt funding mechanism. Using a panel dataset on 155 U.S. firms, we find a positive relationship between companies’ credit rating and the size of their patent portfolio. Our indicators for valuable patents, however, provide a mixed picture. While there is a positive link between the average family size of a company’s patent portfolio and its credit ratings, we surprisingly find a significant negative relationship between patent forward citations and companies ratings. We hypothesize that this finding is the result of citations being associated with patent lawsuits, potentially incurring substantial losses on creditors. (Less)
Please use this url to cite or link to this publication:
author
; and
publishing date
type
Contribution to journal
publication status
published
subject
in
Industrial and Corporate Change
publisher
Oxford University Press
external identifiers
  • scopus:85116135062
ISSN
0960-6491
DOI
10.1093/icc/dtz040
language
English
LU publication?
no
id
7bd36c7a-d194-46d8-b17f-f72411831405
date added to LUP
2019-10-25 14:02:50
date last changed
2022-04-18 18:35:22
@article{7bd36c7a-d194-46d8-b17f-f72411831405,
  abstract     = {{A vast literature documents a positive relationship between patents and companies stock market performance. Nevertheless, evidence on the influence of patents on companies’ debt capacity remains sparse. In this article, we examine the relationship between companies’ patent portfolios and their credit rating, providing relevant, albeit indirect, evidence on patents as a debt funding mechanism. Using a panel dataset on 155 U.S. firms, we find a positive relationship between companies’ credit rating and the size of their patent portfolio. Our indicators for valuable patents, however, provide a mixed picture. While there is a positive link between the average family size of a company’s patent portfolio and its credit ratings, we surprisingly find a significant negative relationship between patent forward citations and companies ratings. We hypothesize that this finding is the result of citations being associated with patent lawsuits, potentially incurring substantial losses on creditors.}},
  author       = {{Frey, Carl Benedikt and Neuhausler, Peter and Blind, Knut}},
  issn         = {{0960-6491}},
  language     = {{eng}},
  publisher    = {{Oxford University Press}},
  series       = {{Industrial and Corporate Change}},
  title        = {{Patents and corporate credit risk}},
  url          = {{http://dx.doi.org/10.1093/icc/dtz040}},
  doi          = {{10.1093/icc/dtz040}},
  year         = {{2019}},
}