Abstract
The Leahy-Smith America Invents Act of 2011 (AIA) fundamentally changed the U.S. public patent system. This study examines whether and how the enactment of the AIA affects innovation-intensive firms’ narrative R&D disclosure. Adopting a difference-in-difference design, we find that the enactment of the AIA is associated with a greater decline in narrative R&D disclosure of innovation-intensive firms relative to non-innovation-intensive firms. This effect is more pronounced for firms that are more concerned about the proprietary costs of disclosure and firms with fewer financial constraints. Moreover, we show that the enactment of the AIA dampens analysts’ information environment and aggravates information asymmetry. Overall, our results suggest that the AIA has a negative impact on corporate disclosure and information asymmetry. The documented unintended effect of the AIA could potentially work against lawmakers’ efforts to bolster innovation and the dissemination of knowledge.
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