The Information Advantage of Forthcoming Patents on Debt Financing

This paper studies the information advantage of forthcoming patents. We find that forthcoming patents can have a significant influence on credit ratings. We also find that forthcoming patents facilitate a reduction of the cost of borrowing after controlling for the credit ratings. Our findings are robust for a propensity score matched approach. Further subsample analyses show that the information advantage of forthcoming patents is more prominent for risky firms as they are more likely to receive better credit rating and have a lower cost of debt