We examine the spillover effect of public firm disclosures on the patent trading market. The patent market is rife with information frictions, yet can potentially facilitate the reallocation of innovation to the most productive users. We find that going from the 25th percentile to the 75th percentile in public firm presence – our proxy for public firm disclosures – is linked to a 9.4% increase in other related parties’ future patent sales. The positive link between public firm presence is stronger where information asymmetry is greatest and where information uncertainty prevails relative to transactions less likely to suffer from information frictions. Tests exploiting cross-sectional variation and public firms’ EDGAR implementation corroborate the resolution of information frictions as a mechanism. Additional tests reveal financial statement disclosure as an important information source facilitating patent sales. Our results speak to an important and underexplored externality of public firm disclosures – its contribution to the patent market.

We investigate the effect of patent disclosures on corporate innovation. Using the American Inventor's Protection Act (AIPA) as a shock that increased patent disclosures, we find an increase in innovation for firms whose rivals reveal more information after the AIPA and a decrease in innovation for firms whose own disclosures are divulged to competitors as a result of the law. These findings suggest patent disclosures generate both spillover benefits and proprietary costs. Our findings provide justification for patent disclosure requirements by demonstrating positive externalities: rivals' disclosures facilitate a firm's innovation. However, we also highlight that mandatory patent disclosures can impose proprietary costs on firms. These results broadly contribute to our understanding of the real effects of disclosure, such that forcing firms to share proprietary information can be privately costly but beneficial to other firms.

We investigate whether green innovators voluntarily provide innovation disclosure to reduce processing costs for stakeholders and gain green-specific disclosure benefits. We observe that green patenting firms provide more innovation disclosure in conference calls than do other innovating peers, controlling for patent value. Using a patent-call unit of analysis, we also provide within-firm evidence that managers highlight their green inventions more on conference calls relative to their other inventions. Green innovators provide more innovation disclosure when the costs of processing patent information are higher and anticipated disclosure benefits are greater. We find some evidence that innovation disclosure is positively associated with green fund ownership and stronger market responses to conference calls as well as proxies for ESG-related reputation. Our findings highlight both capital market and social capital benefits as motivating forces for voluntary innovation disclosure and suggest the nature of a firm’s innovations can impact its information environment.

US GAAP requires most intangible investments to be expensed as incurred, potentially distorting performance measurement. We examine whether voluntary non-GAAP disclosures mitigate these distortions for intangible-intensive firms. We find that intangible-intensive firms are more likely to report non-GAAP performance metrics when GAAP earnings lack relevance and that the resulting exclusions are of higher quality. Challenging the prevailing view that high-quality exclusions are limited to transitory items, we demonstrate that non-GAAP disclosures can also enhance performance measurement by excluding investment expenditures. Consistent with this mechanism, we find that intangible-intensive firms are more likely to exclude investment-related expenditures, that their non-GAAP disclosures are associated with higher returns to intangible investments, and that removing R&D enhances the predictive relevance of the performance metric. These effects are unique to firms that expense, rather than capitalize, intangible assets, highlighting the role of non-GAAP reporting in mitigating distortions arising from the mandatory expensing of intangible investments.

We examine the impact of technological competition on voluntary innovation disclosure around the enactment of the Leahy–Smith America Invents Act of 2011 (“AIA”). The AIA moves the US patent system from the first‐to‐invent to first‐inventor‐to‐file system and induces a patent race that increases technological competition. Firms that are slow to file a patent are disadvantaged in this race. We find that focal firms with lagging patent classes strategically increase scientific publications in their lagging technology areas in an attempt to block competitors from obtaining a patent. This effect is more pronounced in technology areas where the firm has better information about their relative competitive position (proxied by greater inventor mobility), in technology classes with constraints on increasing patent filing timeliness (proxied by fewer experienced attorneys), and areas characterized by more intense competition. We find that the peers of firms with lagging classes experience greater patent filing rejections for lack of novelty and obviousness reasons after the AIA, suggesting that strategic scientific disclosure is effective.

Firm life‐cycle stage reflects a firm's current strategic direction toward exploration independent of age or size. We provide evidence that young life‐cycle firms are particularly vulnerable to negative innovation consequences from financial regulation but do not appear to experience any compensating financial reporting quality (FRQ) benefits. Using a generalized difference‐in‐differences design around Sarbanes Oxley Act of 2002 (SOX), we document a significant reduction in both research and development (R&D) spending and innovation outputs for young life‐cycle stage firms after regulation. Declines in innovation manifest both from the diversion of scarce resources and from the imposition of an organizational culture mismatched to the pursuit of explorative innovation, resulting in a less generalizable and less diversified patent portfolio. However, we find no evidence that improvements to FRQ materialize to offset these costs. Event study analyses suggest that this negative impact was expected by market participants, and postregulation returns confirm this expectation.

We examine the voluntary disclosure behavior of peer firms of hostile takeover targets. We find that peer firms under control threat use a disclosure strategy that emphasizes bad news: they provide more bad news forecasts, tend to bundle bad news forecasts with earnings announcements, use more negative tone in conference call presentations, and more evenly distribute negative tonal words throughout the presentation to heighten the visibility of bad news. This asymmetric disclosure of bad news is concentrated in firms whose managers have greater incentives to mitigate the control threat—firms with younger CEOs, CEOs with higher total compensation, and firms with weaker anti-takeover provisions. Further tests show that peer firms also manage accruals downward. We contribute to the sparse literature on the impact of corporate control contests on voluntary disclosure by demonstrating that peer firms under control threat emphasize bad news to preempt control threat.

We present experimental evidence suggesting that critical audit matter (CAM) disclosures in the auditor's report involving areas of high measurement uncertainty forewarn users of misstatement risk. Specifically, in our first study with MBA students, financial analysts, and attorneys, we find that CAMs (i) lower premisstatement assessments of confidence in the financial statement area disclosed as a CAM, and (ii) lower assessments of auditor responsibility for a subsequently revealed misstatement in a CAM‐related area. In our second study with student participants proxying as mock jurors, we find that the responsibility‐mitigating effect of CAM disclosure is driven by CAM disclosures involving measurement uncertainty, as opposed to CAM disclosures involving categorical determinations. Combined, our findings help reconcile mixed evidence from prior research, supporting the view that the forewarning effect of CAM disclosures involving measurement uncertainty could mitigate perceived auditor responsibility for CAM‐related material misstatements.