Your browser does not support the PubReader view.
Go to this page to see a list of supporting browsers.
Korean Academic Society of Business Administration
[ Article ]
korean management review - Vol. 50, No. 6, pp.1495-1534
ISSN: 1226-1874 (Print)
Print publication date 31 Dec 2021
Received 02 Jun 2021 Revised 12 Jul 2021 Accepted 26 Jul 2021
DOI: https://doi.org/10.17287/kmr.2021.50.6.1495

특허출원이 회사채 신용등급에 미치는 영향

Sejin Jung ; Jeongdae Yim
(First Author) Department of Business Administration, Daegu Catholic University mule53@cu.ac.kr
(Corresponding Author) BK21 FOUR, College of Business Administration, Chonnam National University jdyim@chonnam.ac.kr
Patent Applications and Corporate Bond Ratings


Copyright 2011 THE KOREAN ACADEMIC SOCIETY OF BUSINESS ADMINISTRATION
This is an open access article distributed under the terms of the Creative Commons Attribution License 4.0, which permits unrestricted, distribution, and reproduction in any medium, provided the original work is properly cited.

Abstract

In this study, we investigate the effects of patent applications on corporate bond ratings of Korean listed firms. Using an ordered probit regression, we show that firms with higher patent counts and greater patents to R&D investments are likely to have significantly higher bond ratings. This finding remains robust while considering the differences of firms with patenting versus without patenting, and adopting alternative variables measured by industry-adjusted numbers of patent applications. We further explore two possible channels through which patent applications affect corporate bond ratings. First, patent applications provide expectations for increased cash flows with debt market. Second, patent applications enable improved redeployability of assets held by firms. Through a series of analyses, this study sheds lights on the real effects of patenting activities on the debt market via firms’ bond ratings.

Keywords:

Patent application, corporate bond ratings, cash flow, asset redeployability

References

  • Aghion, P., J. Van Reenen, and L. Zingales(2013), “Innovation and Institutional Ownership,” The American Economic Review, 103(1), pp.277-304. [https://doi.org/10.1257/aer.103.1.277]
  • Alp, A.(2013), “Structural Shifts in Credit Rating Standards,” The Journal of Finance, 68(6), pp.2435-2470. [https://doi.org/10.1111/jofi.12070]
  • Arora, A., M. Ceccegnoli, and W. M. Cohen(2008), “R&D and the Patent Premium,” International Journal of Industrial Organization, 26(5), pp.1153-1179. [https://doi.org/10.1016/j.ijindorg.2007.11.004]
  • Ashbaugh-Skaife, H., D. W. Collins, and R. LaFond (2006), “The Effects of Corporate Governance on Firms’ Credit Ratings,” Journal of Accounting and Economics, 42(1-2), pp.203-243. [https://doi.org/10.1016/j.jacceco.2006.02.003]
  • Bhojarj, S. and P. Sengupta(2003), “Effect of Corporate Governance on Bond Ratings and Yields: The Role of Institutional Investors and Outside Directors,” The Journal of Business, 76(3), pp.455-475.
  • Blume, M. E., F. Lim, and A. C. Mackinlay(1998), “The Declining Credit Quality of U.S. Corporate Debt: Myth or Reality?” The Journal of Finance, 53(4), pp.1389-1413. [https://doi.org/10.1111/0022-1082.00057]
  • Bushee, B. J.(1998), “The Influence of Institutional Investors on Myopic R&D Investment Behavior,” The Accounting Review, 73(3), pp.305-333.
  • Chava, S., V. Nanda, and S. C. Xiao(2017), “Lending to Innovative Firms,” The Review of Corporate Finance Studies, 6(2), pp.234-289. [https://doi.org/10.1093/rcfs/cfx016]
  • Cheng, M. and K. R. Subramanyam(2008), “Analyst Following and Credit Ratings,” Contemporary Accounting Research, 25(4), pp.1007-1044. [https://doi.org/10.1506/car.25.4.3]
  • Choi, J. and J. Noh(2017), “The Effects of Pension Funding Levels on Credit Ratings,” Korean Journal of Financial Studies, 46(2), pp. 305-342. [https://doi.org/10.26845/KJFS.2017.03.46.2.305]
  • Cohen, W. M., R. R. Nelson, and J. P. Walsh(2000), “Protecting Their Intellectual Assets: Appropriability Conditions and Why U.S. Manufacturing Firms Patent (or Not),” National Bureau of Economic Research, Unpublished Working Paper. [https://doi.org/10.3386/w7552]
  • Connolly, R. A. and M. Hirschey(1988), “Market Value and Patents: A Bayesian Approach,” Economics Letters, 27(1), pp.83-87. [https://doi.org/10.1016/0165-1765(88)90224-8]
  • Conti, A., J. Thursby, and M. Thursby(2013), “Patents as Signals for Startup Financing,” The Journal of Industrial Economics, 61(3), pp.592-622. [https://doi.org/10.1111/joie.12025]
  • Czarnitzki, D. and K. Kraft(2004), “Innovation Indicators and Corporate Credit Ratings: Evidence from German Firms,” Economics Letters, 82(3), pp.377-384. [https://doi.org/10.1016/j.econlet.2003.09.016]
  • Ederington, L. H.(1985), “Classification Models and Bond Ratings,” The Financial Review, 20(4), pp.237-262. [https://doi.org/10.1111/j.1540-6288.1985.tb00306.x]
  • Eisdorfer, A. and P. H. Hsu(2011), “Innovate to Survive: The Effect of Technology Competition on Corporate Bankruptcy,” Financial Management, 40(4), pp.1087-1117. [https://doi.org/10.1111/j.1755-053X.2011.01172.x]
  • Francis, B., I. Hasan, Y. Huang, and Z. Sharma (2012), “Do Banks Value Innovation? Evidence from US Firms,” Financial Management, 41(1), pp.159-185. [https://doi.org/10.1111/j.1755-053X.2012.01181.x]
  • Frey, C. B., P. Neuhausler, and K. Blind(2020), “Patents and Corporate Credit Risk,” Industrial and Corporate Change, 29(2), pp.289-308. [https://doi.org/10.1093/icc/dtz040]
  • Gu, F.(2005), “Innovation, Future Earnings, and Market Efficiency,” Journal of Accounting, Auditing, & Finance, 20(4), pp.385-418. [https://doi.org/10.1177/0148558X0502000405]
  • Ha, S. T. and K. S. Lee(2021), “Credit Rating and Stock Price Informativeness of Future Earnings: KIS Credit Score,” Korean Accounting Journal, 30(1), pp.47-74. [https://doi.org/10.24056/KAJ.2020.12.002]
  • Hahn, G., K. Kim, and J. Y. Kwon(2017), “Startup Financing with Patent Signaling under Ambiguity,” Asia-Pacific Journal of Financial Studies, 46(1), pp.32-63. [https://doi.org/10.1111/ajfs.12162]
  • Hall, B. H.(2019), “Is There a Role for Patents in the Financing of New Innovative Firms?” Industrial and Corporate Change, 28(3), pp.657-680. [https://doi.org/10.1093/icc/dty074]
  • Hall, B. H., A. Jaffe, and M. Trajtenberg(2005), “Market Value and Patent Citations,” The RAND Journal of Economics, 36(1), pp.16-38.
  • Hall, B. H. and R. H. Ziedonis(2001), “The Patent Paradox Revisited: An Empirical Study of Patenting in the U.S. Semiconductor Industry, 1979-1995,” The RAND Journal of Economics, 32(1), pp.101-128. [https://doi.org/10.2307/2696400]
  • Harhoff, D.(2009), “The Role of Patents and Licenses in Securing External Finance for Innovation,” European Investment Bank, Unpublished Working Paper.
  • Heeley, M. B., S. F. Matusik, and N. Jain(2007), “Innovation, Appropriability, and the Underpricing of Initial Public Offerings,” The Academy of Management Journal, 50(1), pp.209-225. [https://doi.org/10.5465/amj.2007.24162388]
  • Hirschey, M. and V. J. Richardson(2004), “Are Scientific Indicators of Patent Quality Useful to Investors?” Journal of Empirical Finance, 11(1), pp. 91-107. [https://doi.org/10.1016/j.jempfin.2003.01.001]
  • Hochberg, Y. V., C. J. Serrano, and R. H. Ziedonis (2018), “Patent Collateral, Investor Commitment, and the Market for Venture Lending,” Journal of Financial Economics, 130(1), pp.74-94. [https://doi.org/10.1016/j.jfineco.2018.06.003]
  • Hsu, P. H., H. H. Lee, A. Z. Liu, and Z. Zhang (2015), “Corporate Innovation, Default Risk, and Bond Pricing,” Journal of Corporate Finance, 35, pp.329-344. [https://doi.org/10.1016/j.jcorpfin.2015.09.005]
  • Jaffe, A. B.(1989), “Characterizing the ‘Technological Position’ of Firma, with Application to Quantifying Technological Opportunity and Research Spillovers,” Research Policy, 18(2), pp.87-97. [https://doi.org/10.1016/0048-7333(89)90007-3]
  • Jung, S. and S. Kim(2018), “The Effect of Cash Holdings on Credit Ratings,” The Korean Journal of Financial Management, 35(4), pp.295-326. [https://doi.org/10.22510/kjofm.2018.35.4.012]
  • Jung, S. J., S. C. Kim, and J. D. Yim(2018), “The Effects of Asset-Counted R&D Expenditures and Cost-Counted R&D Expenditures on Credit Ratings,” Journal of International Trade & Commerce, 14(1), pp.571-584. [https://doi.org/10.16980/jitc.14.1.201802.571]
  • Kang, Y. S., J. Yoon, and H. Kim(2016), “The Impact of Corporate Governance on Bond Ratings,” The Korean Journal of Financial Management, 33(3), pp.1-28. [https://doi.org/10.22510/kjofm.2016.33.3.001]
  • Kim, M. S. and J. H. Oh(2013), “Discretionary Accruals’ Relation to Credit Score and Financial Score,” Korean Accounting Journal, 22(4), pp.105-131.
  • Kim, M. T. and Y. H. Kim(2007), “The Impacts of Foreign Ownership and Outside Directors on Bond Grading,” Korean Accounting Review, 32(4), pp.29-58.
  • Kim, P. and Y. M. Nam(2019), “Patents by KOSDAQ Listed Firms,” Korean Journal of Business Administration, 32(2), pp.195-218. [https://doi.org/10.18032/kaaba.2019.32.2.195]
  • Kim, S. and J. Kim(2009), “Innovation and the Default Risk of Firms,” Korean Management Review, 38(3), pp.773-797.
  • Kim, S. and S. Choi(2010), “An Empirical Study of Value-Relevance of Patent Data of Korean Electronic Firms,” Journal of Vocational Rehabilitation, 33(2), pp.3-24.
  • Kim, Y. H. and D. Y. Song(2020), “A Study on the Antitakeover Provisions, Corporate Social Responsibility and Credit Score,” Journal of Industrial Economics and Business, 33(3), pp.639-661. [https://doi.org/10.22558/jieb.2020.6.33.3.639]
  • Kim, Y. J.(2018), “Characteristics of Foreign Blockholders and Credit Ratings,” Korean Journal of Business Administration, 31(8), pp.1509-1526. [https://doi.org/10.18032/kaaba.2018.31.8.1509]
  • Kwon, Y., S. H. Han, and D. Eum(2020), “The Study of IPO Firm Performance: Evidence from Credit Ratings and Credit Scores,” Korean Journal of Financial Engineering, 19(2), pp.83-120.
  • Lanjouw, J. O. and M. Schankerman(2004), “Patent Quality and Research Productivity: Measuring Innovation with Multiple Indicators,” The Economic Journal, 114, pp.441-465. [https://doi.org/10.1111/j.1468-0297.2004.00216.x]
  • Lee, Y. K. and W. J. Lee(2016), “The Effect of Managerial Ability on the Financial Score and Credit Score,” Review of Accounting and Policy Studies, 21(5), pp.1-23. [https://doi.org/10.21737/kjar.2016.10.21.5.1]
  • Lee, G. and J. Og(2015), “A Study on the Impact of Intangible Assets on the Firms Market Value,” Korean International Accounting Review, 62, pp.47-72. [https://doi.org/10.21073/kiar.2015..62.003]
  • Lee, S. H., S. P. Cho, and K. S. Lee(2020), “Impact of Investment Efficiency on Credit Rating,” Korean International Accounting Review, 89, pp.113-133.
  • Levitas, E., and M. A. McFadyen(2009), “Managing Liquidity in Research-intensive Firms: Signaling and Cash Flow Effects of Patents and Alliance Activities,” Strategic Management Journal, 30(6), pp.659-678. [https://doi.org/10.1002/smj.762]
  • Long, C.(2002), “Patent Signals,” The University of Chicago Law Review, 69(2), pp.625-679. [https://doi.org/10.2307/1600501]
  • Mann, R. J. and T. W. Sager(2007), “Patents, Venture Capital, and Software Start-Ups,” Research Policy, 36(2), pp.193-208. [https://doi.org/10.1016/j.respol.2006.10.002]
  • Min, I. and P. Choi(2019), Advanced Panel Data Analysis, 2nd Edition, Jiphil, Korea.
  • Myers, S. C. and N. S. Majluf(1984), “Corporate Financing and Investment Decisions When Firms Have Information That Investors Do Not Have,” Journal of Financial Economics, 13(2), pp.187-221. [https://doi.org/10.1016/0304-405X(84)90023-0]
  • Noh, M. Y. and S. J. Chae(2014), “The Effect of Foreign Currency Exchange Risk on Credit Rating,” Korean Accounting Journal, 23(5), pp.349-377.
  • Park, C. K. and J. Q. Jeon(2019), “Credit Ratings and Centrality of Chaebol-Affiliated Firms,” Asian Review of Financial Research, 32(1), pp.33-53. [https://doi.org/10.37197/ARFR.2019.32.1.2]
  • Romer, P. M.(1990), “Endogenous Technological Change,” Journal of Political Economy, 98 (5), pp.71-102. [https://doi.org/10.1086/261725]
  • Shin, M. S. and S. E. Kim(2010), “The Effects of Credit Rating Changes on Capital Structure Decisions of Firms,” The Korean Journal of Financial Management, 27(4), pp.27-59.
  • Shin, M. S., S. E. Kim, and J. I. Lee(2016), “Collateral Channel Effects of Corporate Asset Structure on Capital Structure,” Journal of Business Research, 31(4), pp.85-109.
  • Shleifer, A. and R. W. Vishny(1992), “Liquidation Values and Debt Capacity: A Market Equilibrium Approach,” The Journal of Finance, 47(4), pp.1343-1366. [https://doi.org/10.1111/j.1540-6261.1992.tb04661.x]
  • Sohn, S. and C. H. Bae(2018), “The Effect of ‘No’ Voting Right of Institutional Investors on the Credit Rating,” Korean Management Review, 47(6), pp.1515-1540. [https://doi.org/10.17287/kmr.2018.47.6.1515]
  • Sohn, S. J.(2011), “Analysis of Korean Sectoral Patent Premium,” The Journal of Intellectual Property, 6(4), pp.159-184. [https://doi.org/10.34122/jip.2011.12.6.4.159]
  • Tong, X. and J. D. Frame(1994), “Measuring National Technological Performance with Patent Claims Data,” Research Policy, 23(2), pp.133-141. [https://doi.org/10.1016/0048-7333(94)90050-7]
  • Wagner, S. and I. Cockburn(2010), “Patents and the Survival of Internet-Related IPOs,” Research Policy, 39(2), pp.214-228. [https://doi.org/10.1016/j.respol.2009.12.003]
  • Williamson, O. E.(1988), “Corporate Finance and Corporate Governance,” The Journal of Finance, 43(3), pp.567-591. [https://doi.org/10.1111/j.1540-6261.1988.tb04592.x]
  • Yim, J.(2021), “Patent Applications and the Cost of Debt: Evidence from Korea,” Asian Review of Financial Research, 34(1), pp.107-144. [https://doi.org/10.37197/ARFR.2021.34.1.3]

∙ The author Sejin Jung is an adjunct professor of Business Administration at Daegu Catholic University. She is a seasoned veteran in Finance industry having worked for Citigroup capital, South Korea for a decade. She subsequently switched her career to academia by obtaining Ph.D. in Business Administration from Kyungpook National University in South Korea. Her main research areas are credit ratings, corporate innovation, and cash holdings.

∙ The author Jeongdae Yim is a research professor of College of Business Administration at Chonnam National University. He earned a bachelor’s degree, a master’s degree, and Ph.D. in Business Administration from Kyungpook National University. His research interests lie in corporate innovation, innovation policy, and environmental management.