Baker and Cunningham (2006)
|Baker and Cunningham (2006)|
|Title:||Court decisions and equity markets: Estimating the value of copyright protection|
|Author(s):||Baker, M., Cunningham, B.|
|Citation:||Baker, M., & Cunningham, B. (2006). Court decisions and equity markets: Estimating the value of copyright protection. Journal of Law and Economics 49(2), 567-596.|
|Link(s):||Definitive , Open Access|
|Key Related Studies:|
|Linked by:||Handke, Guibault and Vallbe (2015), Png (2006)|
|About the Data|
|Data Description:||542 U.S. federal court decisions signed into law over the time period 1986–98.|
|Data Type:||Secondary data|
|Secondary Data Sources:|
|Data Collection Methods:|
|Data Analysis Methods:|
|Cross Country Study?:||No|
|Government or policy study?:||No|
|Time Period(s) of Collection:||
We construct a database of U.S. federal court decisions pertaining to copyright and changes in federal statutory copyright law and use this database to assemble indices measuring changes in the breadth of copyright protection. We combine our indices with information on excess returns to equity from a quarterly panel of firms and estimate how the breadth of copyright affects the market valuation of firm equity. A typical statute that increases copyright breadth generates an increase in a firm’s excess return to equity of 40–209 basis points, depending on the exact time frame, the size of the firm, and the importance of the change in statutory law. A typical high-court decision expanding copyright generates a 13–105 basis-point increase in excess returns. Our results are robust across 4–5-year subsamples and the size distribution of firms. Our statutory findings are strongest in the most recent portion of the sample.
Main Results of the Study
- The authors have calculated measures of changes in copyright law derived from both statutory and case law; they find that within a standard model of firm-level equity valuation, excess returns to equity in copyright industries are significantly influenced by changes in the breadth of copyright protection.
- The average statutory change broadening copyright appears to increase firms’ excess returns by approximately 40 basis points; if one focuses on especially important statutes, this estimate climbs to 140–70 basis points, and if one focuses on relatively larger firms over the most recent sample period, the estimate rises to 209 basis points.
- To the authors' knowledge, this is the first evidence to suggest that the breadth of copyright law is important in determining the performance of firms in copyright industries.
Policy Implications as Stated By Author
This paper has not determined whether equity value increases because changes in the law render existing materials more valuable or because of increased incentive to create new creative works. The authors recommend therefore an analysis that discriminates between these two aspects of expanded breadth (coupled with the analysis presented in this paper) in order to help establish the optimal breadth of copyright protection.
Coverage of Study
|Level of aggregation:||U.S. federal court decisions|
|Period of material under study:||1986-1988|