Trademark Protection and Corporate Leasing: Evidence From a Quasi‐Natural Experiment
Abstract
Does protection of trademark‐related intangible capital affect firms’ real contracting decisions? We exploit the Federal Trademark Dilution Act of 1996 (FTDA) as a plausibly exogenous strengthening of legal protection to answer the question. In a difference‐in‐differences design using a propensity‐score‐matched sample, treated firms reduce their reliance on operating leases following the reform, with declines ranging from 3.5% to 5.3% of a standard deviation of the outcome variables. The results are robust to event‐study tests showing no differential pre‐trends, placebo tests using a fictitious treatment date, and alternative estimation windows. The decline in leasing is more pronounced among firms with higher pre‐FTDA branding intensity, cash‐flow volatility, R&D intensity, and product‐market fluidity, where lease flexibility is likely more valuable. Treated firms also experience higher average cash flows and lower cash‐flow volatility, while showing no systematic changes in capital expenditures and total leverage. The evidence indicates that stronger trademark protection is associated with both more stable brand‐related cash flows and reduced use of operating lease contracts, consistent with an operating‐stability channel.