Ricky Xu Yao

• Abstract: 

I examine whether patent box regimes induce firms to substitute from trade secrecy toward patenting. Focusing on the staggered adoption of patent boxes across Europe, I document that patenting among local firms in adopting countries rises sharply and immediately upon adoption, a dynamic more consistent with firms disclosing existing inventions than with newly initiated R&D. A series of complementary tests confirms this: the response concentrates where firms rely more on trade secrecy, hold larger stocks of unpatented inventions, and face lower disclosure costs, and shows no change in real R&D inputs. By moving inventions out of secrecy and into the patent system, these regimes expand the pool of publicly disclosed knowledge, which attracts follow-on innovation, generates productivity spillovers, and reduces industry concentration. These findings reveal a disclosure-driven channel through which patent boxes promote knowledge spillovers that input-based instruments such as R&D tax credits do not directly target.

• Abstract: 

We examine whether tax complexity hinders the effectiveness tax incentives that are intended to promote innovation. While many jurisdictions offer tax incentives for innovative activities, these incentives vary widely in their complexity, which may affect the extent to which they stimulate innovation. Exploiting variation across U.S. states over four decades, we develop a novel, time-varying measure of complexity in state-level R&D tax credit policies. We find that while larger R&D tax credits are positively associated with future corporate patenting, the effect is attenuated when tax credit complexity is high. This attenuation varies cross-sectionally based on the type of tax complexity and with firm characteristics. Finally, we find that while R&D tax credits are associated with lower innovation novelty on average, tax complexity does not materially moderate this effect. Overall, our findings indicate that tax complexity hinders the effectiveness of innovation incentives, with important implications for policy design and knowledge spillovers.

• Abstract: 

We examine whether public companies change their disclosures to align with the policy preferences of powerful political actors—which we refer to as “political tailoring.” Focusing on the setting of President Donald Trump’s first and second terms in office, we study the political tailoring of discussions around tariffs, an issue with both substantial policy salience and cash flow implications. Using earnings conference call transcripts, we employ a large language model to classify the extent to which tariff discussions are politically tailored. We find that firms with incentives to appease those in charge of tariff policy, such as firms who are the most exposed to tariffs, firms that engage in other forms of political catering, such as via PAC contributions and lobbying, and firms with republican CEOs engage in greater political tailoring of these disclosures. We find evidence consistent with this tailoring having payoffs: political tailoring is positively associated with the granting of tariff exemptions during the first Trump administration, but not with the awarding of government contracts. We also find that political tailoring is negatively (positively) associated with disclosure readability (verbosity), suggesting that a potential cost to political tailoring is less informative disclosures. Our findings contribute to literatures on political influence and corporate disclosure by documenting a novel form of non-financial strategic communication with potential implications for transparency and firm value.

• Abstract: 

We examine whether disclosure of firms’ tax compliance affects international trade. In 2015, China began disclosing firms receiving the top tax compliance rating, based on detailed records of tax compliance, transactional reliability, and financial record-keeping. We posit that this disclosure provides foreign buyers with an accessible, government-assessed signal of firm integrity and reporting credibility. Using transaction-level export data, we find that top-rated firms increase exports by 7.4% relatively following the disclosure, with stronger effects on new relationship formation. Consistent with reduced information frictions, effects are stronger for private firms, in markets with lower perceived reporting quality, and where alternative information channels are limited. The effects are not driven by government-conferred privileges or confounding changes in firm fundamentals. We further show that disclosure reduces relationship disruptions and improves customer operating performance. Overall, our evidence shows that tax-related administrative information can serve purposes beyond enforcement by reducing information frictions in international trade.