Changes in Firm Value According to Patent Acquisition Announcement

Abstract

Patents play a vital role in securing technological competitiveness for companies. Acquisition of such means the definitive acquisition of exclusive rights that substantially contribute to the improvement of firm value, so it is appropriate to observe changes in firm value. This study examines the change in firm value according to the announcement of patent acquisition based on data disclosed by companies from February 2009 to January 2017, when the acquisition of patent rights was changed from ad-hoc disclosure to voluntary disclosure. After estimating the abnormal return through the market model of the event study methodology, the factors affecting firm value were analyzed through regression analysis with the cumulative abnormal return as a dependent variable. The main empirical analysis results of the study are as follows. First, in the patent application, the average abnormal return appears positive before the announcement, and then the AAR turns negative on D-0. As for patent acquisition, the AAR appears positive on D-0 and then turns negative after the announcement. Before it is officially announced, information about a patent application is already reflected in stock prices by market forecasts or insider trading, while the information about patent acquisition is reflected in stock prices at the time of public announcement. There is a difference in the reaction time of investors in the stock market depending on patent application and patent acquisition. In particular, although a patent acquisition announcement is self-disclosure, investors still perceive a company’s patent acquisition as useful information, which eventually enhances firm value. Second, because of the identifying factors that affect firm value, significant differences were found in firm value depending on the country in which a patent was obtained. As for corporate characteristics, the lower the R&D expense, the leverage ratio, and the operating profit-to-sales ratio, the higher the firm value whereas the higher the beta, the higher the firm value.