Sapnoti Eswar, Univ. of St. Andrews: "Cross-border Patenting and Corporate Debt Capacity"

We use global patent data and exploit the staggered adoption of the Patent Prosecution Highway, a patent examination cooperation program to evaluate the effect of globalization of patents on debt capacity of firms. We show that patents filed globally are of higher quality, and loans to patenting firms increases. This increase is driven by a reduction in information asymmetry in global lending markets. We also find that firms obtain international loans in low-tax countries which leads to a lower average tax burden. This lower burden creates a higher debt capacity for patenting firms.