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Insights at the Intersection of Asset Pricing and Corporate Finance

Paper Session

Monday, Jan. 5, 2026 1:00 PM - 3:00 PM (EST)

Philadelphia Marriott Downtown, Room 308
Hosted By: Econometric Society
  • Chair: Winston Wei Dou, University of Pennsylvania

The Economics of Patent Licensing: Theory and Evidence on the Determinants and Consequences of Patent Licensing Transactions

Onur Bayar
,
University of Texas-San Antonio
Thomas Chemmanur
,
Boston College
Xi Chen
,
San Diego State University
Jingxuan Zhang
,
University of Alberta

Abstract

We investigate the economics of patent licensing theoretically and empirically. We first develop a dynamic search model in which an innovating firm chooses among three possibilities: retaining patents in-house; or monetizing them by licensing or selling to other firms. We use model predictions to develop testable hypotheses. We address three research questions empirically: the characteristics of licensors and licensees and the determinants of the matching between the two; the patent characteristics driving a licensor's decision to retain, license, or sell certain patents; and the consequences of licensing transactions for licensors and licensees. Licensors prefer to license patents to downstream firms and to firms with less similar technology. Licensors retain patents closer in technology distance to their core operations in house; they monetize those patents that are farther away from their core operations, choosing to sell those patents that are farthest away from their core operations, while licensing out patents that are in-between in terms of technological distance from core operations. Licensees, on the other hand, license in only patents that are closer to their core operations. Both our baseline analysis and a difference-in-differences analysis around the National Technology Transfer and Advancement Act of 1995 show that licensing transactions are efficient, increasing the Tobin’s Q of both licensors and licensees. The channels of equity market value creation are, however, different for licensors and licensees. Licensors benefit from the licensing fees they receive from licensees (with Tobin’s Q greater for licensors that obtain higher royalites from licensees); licensors also devote greater resources to innovation inputs (R\&D expenditures) after licensing transactions, with a resulting increase in innovation productivity. Licensees, on the other hand, benefit from exposure to new technologies, leading to an increase in their innovation efficiency and introducing more new products after licensing transactions.

Maturity Walls

Philip Coyle
,
University of Wisconsin-Madison

Abstract

Maturity walls occur when a majority of a firm’s debt comes due within a short period (1-2 years), increasing rollover risk. Despite this, 47% of non-financial firms have them. This paper understands why firms adopt maturity walls and its implications for the aggregate economy. Using Mergent FISD data, I provide evidence that firms incur substantial fixed costs in bond issuance. I develop a dynamic model where firms decide each period the level and dispersion of their debt payments. The main trade-off is rollover risk from maturity walls in the presence of costly equity injections, versus the lower issuance costs incurred from infrequent rollovers. I estimate the model to match both aggregate and distributional moments of firms’ debt payment schedules. Maturity walls increase credit spreads by 21% (36 bps) and default rates by 25% (30 bps). Lowering issuance costs reduces the adoption of maturity walls, but increases firms credit risk. Moreover, omitting maturity walls could underestimate the transmission of a credit market freeze up to 60%.

Echoes of Inflation: CEO Early-life Inflation Experience, Inflation Attention, and Corporate Decisions

Diego Garcia
,
University of Colorado
Chanik Jo
,
Chinese University of Hong Kong
Michael Shin
,
California State University-Northridge
Siyuan Wu
,
Chinese University of Hong Kong

Abstract

We study how firm-level inflation attention influences corporate decisions. We construct a measure of inflation attention using earnings calls from 2003 to 2024. Our identification strategy exploits exogenous variation in attention from CEOs' childhood exposure to inflation. CEOs who experienced higher inflation in their formative years exhibit greater inflation attention following inflation shocks. Firms led by these CEOs increase leverage, reduce cash holdings, and expand employment, consistent with inflation attention reflecting expectations of demand-driven inflation. Our analysis highlights how early-life experiences shape inflation attention and corporate decisions in response to macroeconomic shocks.

Operating Leverage and Risk Premium

Leonid Kogan
,
Massachusetts Institute of Technology
Jun Li
,
University of Texas at Dallas
Harold Huibing Zhang
,
University of Texas at Dallas
Yifan Zhu
,
BI Norwegian Business School

Abstract

We introduce an out-of-sample neural-network-based measure of firm-level operating leverage, which outperforms existing ones in capturing the elasticity of operating profits
to gross profits. Strikingly, our analysis uncovers a non-monotonic—and potentially negative—relationship between operating leverage and the risk premium. This challenges
conventional wisdom and contradicts explanations that link operating leverage to the value premium. A production-based asset pricing model incorporating both variable and fixed costs provides a possible rationale for these empirical findings. Furthermore, our analysis offers a fresh perspective on the idiosyncratic volatility premium
by emphasizing the interplay between the operating hedge effect induced by variable costs and the operating leverage effect induced by fixed costs.

Discussant(s)
Kai Li
,
University of British Columbia
Zhiguo He
,
Stanford University
Marius Guenzel
,
University of Pennsylvania
Jules Van Binsbergen
,
University of Pennsylvania
JEL Classifications
  • G12 - Asset Pricing; Trading Volume; Bond Interest Rates