Marijuana liberalization and public finance: A capital market perspective on the passage of medical use laws

Cheng, Stephanie F.; Franco, Gus De; Lin, Pengkai

doi:10.1016/j.jacceco.2022.101516

Cited by 23 publications

(7 citation statements)

References 57 publications

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“…Second, this study contributes to our understanding of how marijuana legalization affects regional economy. Research shows that the increased use of controlled substances (e.g., marijuana and opioids) negatively affects local economies by causing higher public financing costs (Cheng et al., 2022) and lower business valuations (Ouimet et al., 2021). Our findings contribute to this research by adding new evidence that marijuana legalization leads to the destruction of economic value.…”

Section: Discussion and Future Researchmentioning

confidence: 99%

“…Empirical research confirms that MMLs have a spillover effect on illicit users by inducing greater non‐medical marijuana consumption (Cerda et al., 2012; Hasin et al., 2017; Wen et al., 2015). MMLs also tend to be associated with increased marijuana availability and acceptance (Cheng et al., 2022) and thus may have significant implications on economic activity.…”

Section: Introductionmentioning

confidence: 99%

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“High” innovators? Marijuana legalization and regional innovation

Cheng

Lin

Tan

et al. 2023

Production and Operations Management

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The past three decades have witnessed a tremendous shift in public health policies toward marijuana legalization in the United States. Adopting the process-based view of innovation, we hypothesize that marijuana's increased use and related consequences after its legalization affect innovators' behavior and social environment during the innovation process, which in turn impacts regional innovation. Utilizing the staggered adoption of medical marijuana laws (MMLs) by 20 states between 1996 and 2013 as a quasi-experimental setting, we find that legalizing medical marijuana reduces the overall output of regional innovation as proxied by patents' total forward-citation count aggregated by innovator location. Further analyses decomposing the overall output into patent quantity and quality reveal that the quantity of certain patents rises after states' medical marijuana legalization. More importantly, these analyses show that the quality of all patents, especially that of "hit" patents, deteriorates, leading to a net negative effect on the overall output. These tests further suggest that different findings concerning patent quantity and quality are related to marijuana legalization's diverse influence on innovators' individual and collaborative effectiveness during the innovation process. The decline in innovation output and quality after the adoption of MMLs is robust to the use of additional identification strategies. The evidence suggests that legalizing medical marijuana has an adverse effect on regional innovation activity.

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Section: Discussion and Future Researchmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

“High” innovators? Marijuana legalization and regional innovation

Cheng

Lin

Tan

et al. 2023

Production and Operations Management

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“…As such, we predict that common ownership should have an incremental positive effect on accounting conservatism, which in turn leads to reduced crash risk. To test our prediction, we follow S. F. Cheng et al (2022) and Di Giuli and Laux (2022) and estimate the following two‐stage regressions:

{italicCScore}_{i, t} = β_{0} + β_{1} Common {italicOwnership}_{i, t} + β_{2} Z_{i, t} + Fixed Effects + ε_{i, t},

{italicCrash Risk}_{i, t + 1} = β_{0} + β_{1} {\overset{CScore}{true}}_{i, t} + β_{2} Z_{i, t} + Fixed Effects + ε_{i, t},

where CScore in Equation (4) is the firm‐year conservatism measure proposed by Khan and Watts (2009). In the first stage, we regress CScore on common ownership and the set of control variables in our baseline model.…”

Section: Do Common Owners Reduce Crash Risk Through Curbing Bad News ...mentioning

confidence: 99%

“…unwinding their positions due to price impact (Brunnermeier & Pedersen, 2005;Chiyachantana et al, 2004) and because they are sometimes forced to liquidate positions due to capital withdrawals (Shleifer & Vishny, 2011). A survey by Allianz Global Investors indicates that nearly two-thirds of the 735 institutional investors surveyed state that tail risk has become an increasing concern.…”

Section: Introductionmentioning

confidence: 99%

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Common institutional ownership and stock price crash risk

Chen,

Ma,

et al. 2023

Contemporary Accting Res

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This paper presents new evidence on the economic benefits arising from common institutional ownership. We find a negative and significant effect of common institutional ownership on stock price crash risk. This effect is robust to a battery of robustness checks and is causal according to some identification tests, including difference‐in‐differences analyses on financial institution mergers. We find evidence that the negative effect is attributable to the monitoring role of common institutional owners—a role that is enabled by common owners’ lower information processing cost and greater monitoring incentives owing to governance externalities. We also find that common owners negatively influence crash risk through constraining bad news hoarding and that common owners are more likely to force CEO turnover when a firm has higher crash risk. Overall, our results suggest that common institutional shareholders play a unique and effective monitoring role that fends off stock price crashes.This article is protected by copyright. All rights reserved.

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