Consolidating Product Lines via Mergers and Acquisitions: Evidence from the USPTO Trademark Data

Hsu, Po–Hsuan; Li, Kai; Xing, Liu; Wu, Hong

doi:10.2139/ssrn.3002520

Cited by 4 publications

(5 citation statements)

References 24 publications

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“…For example, Block et al (2014) found that the number and breadth of trademark applications have inverted U-shaped relationships with the financial valuations of start-ups by venture capitalists. Hsu, Li, Liu, and Wu (2020) create a new measure for product market competition based on trademark data and find that companies facing greater competition are more likely to be acquirers. Hsu et al (2018) showed that firms with more trademarks experience significantly higher future profitability and higher future abnormal stock return.…”

Section: Recent Literature On Trademarksmentioning

confidence: 99%

“…Trademarks may decrease information asymmetry and reduce IPO underpricing for two reasons. First, as an output of a firm's late-stage innovation, the disclosure of trademarking activities conveys important information about a firm's new product or service (Faurel et al, 2019;Fink et al, 2019;Gao & Hitt, 2012;Hsu et al, 2020). This is also evidenced by Amazon's trademark application for the slogan "We do the prep.…”

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confidence: 99%

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Trademark and IPO underpricing

Yang

Yuan

2021

Financial Management

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Although trademarks are mentioned in many firms' initial public offering (IPO) prospectuses, their influences on the IPO valuation process are underexplored. This paper studies the relationship between a firm's pre-IPO trademarks and its IPO underpricing. Using 4457 US IPOs during the period 1980-2018, we find that firms with a larger number of trademarks prior to the IPO date experience significantly less IPO underpricing. We employ a quasi-natural experiment brought about by the 1996 Federal Trademark Dilution Act and an instrumental variable approach to establish causality.Our findings suggest that trademarks help reduce information asymmetry among various IPO participants, leading to less underpriced IPOs.

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Section: Recent Literature On Trademarksmentioning

confidence: 99%

mentioning

confidence: 99%

Trademark and IPO underpricing

Yang

Yuan

2021

Financial Management

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“…Brand equity has been shown to significantly contribute to firm value (Faurel et al., 2021; Rao et al., 2004; Sandner & Block, 2011) and to be associated with higher firm performance (Crass et al., 2019; Heath & Mace, 2020; Krasnikov et al., 2009), higher credit ratings (Larkin, 2013; Rego et al., 2009) and lower firm risk (Larkin, 2013; Rego et al., 2009). Studies also show that brand equity plays a significant role in firms’ merger and acquisition (M&A) activity (Capron & Hulland, 1999; Hsu, Li, Liu, & Wu, 2021; Wiles et al., 2012), financing decisions (Larkin, 2013), initial public offering (IPO) underpricing (Drivas et al., 2018; Yang & Yuan, 2021), borrowing costs (Chiu et al., 2021) and financial reporting irregularities (Ismail et al., 2021). In this paper, we examine the effect of brand equity on firms’ leverage and debt maturity decisions.…”

Section: Introductionmentioning

confidence: 99%

Brand equity and corporate debt structure

Mauer

Villatoro

Zhang

2022

Business Fin & Account

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We use the firm's stock of trademarks and their ages to compute proxies for brand equity. We find that firms with more brand equity have lower equity and asset volatility and higher cash flows. Although suggestive of greater debt capacity, we find that firms with high brand equity use less debt. Further, brand equity has no influence on debt maturity. We provide evidence that the relation between brand equity and leverage is causal, using the enactment of the Federal Trademark Dilution Act in 1996, which exogenously increased the value of famous brands and significantly decreased the leverage ratio of firms with famous brands. This negative effect on leverage is weaker for firms with high business risk and low information asymmetry, and stronger for firms with collateralized trademarks. We argue that the negative effect of brand equity on leverage is more consistent with a pecking order mechanism than with a limited contractability mechanism.

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“…Alimov and Officer (2017) document higher synergy gains when an international target is from an emerging country that has strong patent protection laws. Using textual analysis and trademark data,Hsu et al (2018) show greater combined firm announcement returns when targets and acquirers share a similar class of trademarks prior to the merger. Further,Hsu et al (2020) present that new trademarks are positively associated with future firm profitability and stock returns.…”

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confidence: 99%

Unpatented innovation and merger synergies

et al. 2021

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Consolidating Product Lines via Mergers and Acquisitions: Evidence from the USPTO Trademark Data

Cited by 4 publications

References 24 publications

Trademark and IPO underpricing

Trademark and IPO underpricing

Brand equity and corporate debt structure

Unpatented innovation and merger synergies

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