Empirical analysis reveals patent metrics reliably predict stock performance in R&D-intensive companies, indicating public innovation indicators enhance market valuation accuracy.
Key Points
To determine whether publicly available patent indicators can measure corporate innovation potential and predict future stock returns and market-to-book ratios.
Assessed public patent-related metrics capturing corporate research volume, downstream citation impact, and the closeness of R&D to basic science.
Tested the statistical association between these patent measures and subsequent stock returns as well as market-to-book ratios among R&D-intensive firms.
Patent measures reflecting research volume, citation influence on future inventions, and proximity to scientific research show reliable, positive associations with future stock returns and market-to-book ratios.
Public patent data provide timely, predictive signals of corporate growth and capital market performance where traditional R&D disclosures are limited.