The objective of this paper is to prove the existence of abnormal returns of director dealings based on patent applications in a broader framework of indicators for the success of reported insider trading. Furthermore, the focus will be set on the role of patent importance on the actual performance of the different director dealings.
Before discussing the impact of patent applications on director dealings, the first step must be a definitional framework of the frequently used terms such as "insider trading" and "patent" which need to be placed in an economic context. Furthermore, chapter 2 explains basic principals of the two components of insider trading, namely: information asymmetry and corporate value creation. Additionally, the legal and institutional setting for insider trading and the patent application process is being discussed. Herein, the focus will lie on the reduction for information asymmetry through legal regulations.
Chapter 3 discusses indicators for and information upon which successful insider trad-ing is based. After distinguishing between the different classical information for directorial rent appropriation, the focus will lie on practically examining whether or not knowledge on imminent breakthroughs are an appropriate vehicle for insider trading. Then, the signaling effect of patent applications on imminent breakthroughs will be discussed, and the indications for a connection between patent applications and director dealings will be provided. In chapter 4 results of the empirical will be reported. The study is organized in three steps, aiming to provide evidence that with increasing patent importance, abnormal returns for related director dealings rise.
Inhaltsverzeichnis (Table of Contents)
- Introduction
- Problem and Objective of the Paper
- Organization of the Paper
- Definitions and Basic Principles
- Definitions
- Knowledge-based View and Asymmetric Information
- Theoretical Impact of Asymmetric Informatio..
- Value Creation in the Light of the Knowledge-based View
- Legal Regulations and Institutional Settings in Germany
- Insider Trading ..
- Illegal Insider Trading….
- Director Dealings.
- Patent Application Process and Publication.
- Director Dealings on Knowledge of Imminent Breakthroughs........
- Classical Rent Appropriation through Insider Trading.
- Director Dealings as Anti-Cyclical Investing
- Abnormal Returns around Announcements
- Research and Development as Instrument for Rent Appropriation……………………
- Research and Development, Patents, and the Value of a Firm ...
- Managerial Foresight on Corporate Research and Development ....242
- Patent Application and Director Dealings.
- Measuring the Scope of a Patent.
- Abnormal Returns of Director Dealings on Patent Activity..\n
- Empirical Study....
- Sample Data.........
- Director Dealings Sample......
- Patent Sample.
- Share and Index Return Sample
- Balance Sheet and Profit and Loss Sample .......
- Matching Director Dealings, Share and Index Return, and Patent Sample
- Dependent Variables..
- Independent Variables.
- Control Variables.....
- Methodology..\n
- Organization of the Study..\n
- Long-Horizon Event Study.\n
- Short-Horizon Event Study
- Regression Analysis
- Results
- Abnormal Returns after Director Dealings on Patent Applications.
- Abnormal Returns after Patent Publication.
- Long-Run Abnormal Returns after Director Dealings and the Impact of Patent Publication.
- The role of asymmetric information in corporate decision-making and its impact on firm value.
- The relationship between director dealings and patent application activity.
- The existence of abnormal returns around announcements of director dealings and patent publications.
- The use of event study methodology and regression analysis to identify and measure the effects of director dealings and patent activity.
- The implications of the findings for corporate governance, investor behavior, and the regulation of insider trading.
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
This study aims to empirically examine the relationship between director dealings and patent application activity, specifically focusing on the abnormal returns generated by such dealings. The research delves into the impact of knowledge about imminent breakthroughs on corporate value and the potential for insider trading in this context.
Zusammenfassung der Kapitel (Chapter Summaries)
Chapter 1 introduces the research question and the objective of the study. It discusses the need for research in the area of director dealings and patent applications, highlighting the potential for insider trading and its impact on corporate value. Chapter 2 provides definitions of key terms and outlines the theoretical framework. It explores the knowledge-based view of the firm, the concept of asymmetric information, and the legal regulations surrounding insider trading and patent application processes in Germany. Chapter 3 investigates the relationship between director dealings and the knowledge of imminent breakthroughs. It examines how directors can potentially use their insider information to generate abnormal returns through various mechanisms, such as classical rent appropriation and research and development strategies. The chapter analyzes the potential for directors to capitalize on their knowledge of patent applications and the associated market reactions. Chapter 4 presents the empirical study, outlining the sample data, methodology, and results. The analysis focuses on identifying and quantifying the abnormal returns generated by director dealings and patent publications through various event study methods and regression analysis.
Schlüsselwörter (Keywords)
The study focuses on the core concepts of director dealings, patent applications, asymmetric information, insider trading, abnormal returns, event studies, and corporate governance. It investigates the impact of knowledge-based information on firm value and explores the ethical and legal implications of director dealings in the context of innovation and intellectual property.
- Quote paper
- Bachelor of Science Alexander Friedrich (Author), 2007, Patent Applications and Director Dealings, Munich, GRIN Verlag, https://www.grin.com/document/83231
