Research Institute of Business Administration早稲田大学 産業経営研究所

Patents are the final product of firms’ R&D investment; therefore, both these firms and the banks heavily exposed to them may change their behavior when patents are invalidated. Using the random assignment of judges’ leniency as an instrument, we identify the causal effect of patent invalidation on bank loan provision. We find a significant decline in lending after invalidation. This decline is driven by banks’ reduced exposure to affected firms, as the decrease is concentrated among bank-dependent firms with limited access to alternative financing sources and is not correlated with the patent’s value. Moreover, we show that bank-dependent firms reduce their R&D investment and file fewer patent applications following invalidation. The evidence establishes a causal link between intellectual capital and bank lending and indicates that Japanese banks’ conservative attitudes toward risky investments continue to shape credit allocation despite policy advocacy for the past decades.