Free Speech, the Right to Petition, and Corporate Innovation

Abstract

Using the passage of state-level anti-SLAPP (strategic lawsuits against public participation) legislation as a plausible shock to free speech and the right to petition, we hypothesize and find that corporate innovation success increases following the passage of state anti-SLAPP laws. Our results suggest that the increase occurs through two channels: (i) a reduction in information asymmetry between the firm and outside investors on innovation investments and (ii) a reallocation of external capital to firms with higher growth prospects. Consistent with an informational channel, we find the increase is stronger for firms with an ex-ante lower quality information environment. Consistent with an external capital channel, our results also support the theory that outside capital providers are better able to distinguish between superior and inferior innovators in allocating their capital after the enactment of anti-SLAPP laws in a state. Our results hold under a battery of robustness tests. Overall, our results do not support the alternative view that firms use SLAPP lawsuits to stifle the release of public information contrary to their interests (e.g., proprietary information on trade secrets). Our study contributes to the accounting, law, and economics literatures by documenting a potentially unintended economic consequence for corporate innovation of state-level anti-SLAPP legislation.