Essays on Finance and Corporate Innovation

No abstract available ; Innovation shapes corporate life. Companies innovate in order to keep their competitive advantage on the market. Over the long run, if companies do not innovate, they lose their position on the market and may even go bankrupt if their peers continue to innovate. Corporate innovation affects many companies’ decisions – from the choice of corporate innovation strategy itself to the firms' interaction with their peers and banks. My dissertation aims to stress the importance of innovation in corporate life by showing the impact of innovation on firm boundaries, corporate disclosure policy, and lending. In the first chapter, I study how firms’ choices of M&A, licensing, collaboration, and their performance depend on the extent of their innovation linkages. I find that innovation matters for firm boundaries. Companies integrate more tightly with peers with closer follow-on innovation. Based on patent citations, I construct a measure capturing what firms are the innovation originators and what firms are the followers, which I call innovation proximity. I find that companies are more likely to acquire peers with closer follow-on innovation rather than to create strategic alliances with them or license/buy their patents. My measure of innovation proximity does not affect firms’ combined announcement returns but only the way they are split. In M&A transactions with the target with closer follow-on innovation, the bidder pays a lower premium and exhibits greater announcement returns. On the other hand, in licensing and strategic alliance deals with patent holder with closer follow-on innovation, the patent seeker obtains lower returns. These results are consistent with the hold-up theory where companies bargain over type and terms of the contract. In the second chapter, I focus on corporate nondisclosure and firm value. The evidences are based on the confidential treatment (CT) of corporate information. CT can exacerbate information asymmetry and agency problems but may also protect trade ...