TY - JOUR
T1 - More Cash, Less Innovation
T2 - The Effect of the American Jobs Creation Act on Patent Value
AU - Almeida, Heitor
AU - Hsu, Po Hsuan
AU - Li, Dongmei
AU - Tseng, Kevin
N1 - Publisher Copyright:
© 2021 Cambridge University Press. All rights reserved.
PY - 2021/2
Y1 - 2021/2
N2 - Firms can become less innovative following a sudden cash inflow. Specifically, multinational firms that were eligible to repatriate (and indeed repatriated) cash to the United States under the American Jobs Creation Act (AJCA) generate less valuable patents than otherwise similar firms. They also explore more. This effect only exists among firms in less competitive industries, firms with lower institutional ownership (IO), and firms with overconfident chief executive officers (CEOs); this effect is mainly driven by the reduction in the value of U.S.-originated patents. Our evidence suggests that, without appropriate governance, a cash windfall may lead managers to engage in riskier innovation strategy, which can destroy value.
AB - Firms can become less innovative following a sudden cash inflow. Specifically, multinational firms that were eligible to repatriate (and indeed repatriated) cash to the United States under the American Jobs Creation Act (AJCA) generate less valuable patents than otherwise similar firms. They also explore more. This effect only exists among firms in less competitive industries, firms with lower institutional ownership (IO), and firms with overconfident chief executive officers (CEOs); this effect is mainly driven by the reduction in the value of U.S.-originated patents. Our evidence suggests that, without appropriate governance, a cash windfall may lead managers to engage in riskier innovation strategy, which can destroy value.
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U2 - 10.1017/S0022109019000954
DO - 10.1017/S0022109019000954
M3 - Article
AN - SCOPUS:85099565881
SN - 0022-1090
VL - 56
SP - 1
EP - 28
JO - Journal of Financial and Quantitative Analysis
JF - Journal of Financial and Quantitative Analysis
IS - 1
ER -