Torin McFarland

Regulating Inventors

(Job Market Paper)

Invited for Dual Submission to the Review of Financial Studies

- Dr. John J. Clark Outstanding Economics Research Paper Award, LeBow College of Business, 2024.

- Outstanding Doctoral Student Paper, Southern Finance Association, 2024. 

Abstract:  I study how regulatory burden disrupts the careers of productive inventors.  Using structural topic modeling and the text of paperwork regulations, I develop a time-varying inventor-specific measure of regulatory burden.  I show that inventors facing high burden exhibit decreased productivity and lower quality innovations.  A 1 standard deviation increase in time spent on compliance decreases patenting by 5.4% and decreases citations accrued by 5.1%.  These results are stronger in Star Inventors.  In labor markets, I find evidence consistent with a disutility channel:  after experiencing increases in burden, inventors are more likely to change jobs and seek lower burden technology areas.  

Presentations:  Georgetown University Spring 2025 Labor and Finance Group Conference, Southern Finance Association 2024, Financial Management Association 2024, Financial Management Association European Conference 2024, American Law & Economics Association 2024 (Roundtable), Eastern Finance Association 2024, American Finance Association 2024 (PhD Poster Session), Financial Management Association 2023 (Special PhD Paper Presentation and Doctoral Consortium), Federal Reserve Bank of Philadelphia 2023, Financial Management Association European Conference 2023 (Doctoral Consortium), IFPHD Seminar 2024, University of Mississippi (Ole Miss) 2024, University of Massachusetts Amherst 2024, University of Denver 2024, Marquette University 2024, Florida Atlantic University 2024, San Diego State University 2024

Scheduled: Financial Intermediation Research Society Annual Meeting 2025 

Escaping Non-Compete Agreements:  The Role of Social Connections 

with Jason (Pang-Li) Chen and Melissa Crumling

Abstract:  This paper shows that social ties propagate the effects of stricter non-compete agreement (NCA) enforcement across geographic boundaries. While existing studies emphasize negative local impacts of strengthened NCA enforcement, such as decreased labor mobility, reduced wages, and lower innovation output, we explore interstate spillover effects facilitated by inventors' social networks. Using inventor-level data and the Social Connectedness Index developed from Facebook friendship links, we demonstrate that inventors respond to tighter NCA policies by relocating to distant counties where they have strong social ties. Moreover, we find that out-of-state regions with high social proximity to inventors from states with strengthened NCA enforcement experience a 7% growth in both inventor populations and innovation output, measured by increased patent counts and citations. These spillover benefits particularly accrue to young and private firms and result in increased entrepreneurial activity, as measured by new firm formation and venture capital funding. Combined, these findings are consistent with social ties alleviating informational frictions and enhancing labor market matching efficiency. Overall, our findings highlight the importance of social ties in generating cross-regional spillovers when implementing labor mobility policies. 

Presentations:  Southern Finance Association 2024*, American Law & Economics Association 2024 (Roundtable)*, Eastern Finance Association 2024*, Columbia PE Conference PhD Workshop 2024*, IMFB Conference 2024*, Financial Management Association 2023*, WEFI Fellows Workshop 2023*, Drexel University Brownbag 2023

How Does Financial Reporting Affect the Market for Corporate Control?

with Eliezer Fich and Paolo Volpin

Abstract:  US listed firms with reduced financial reporting (“non-accelerated filers” and “smaller reporting companies”) are 20% less likely to become takeover targets, compared with other firms. This result holds across several empirical specifications, including regression discontinuity analyses (around the public float cutoff to qualify for reduced reporting) and difference-in-differences tests (using the 2007 regulatory change that introduced the “smaller reporting companies” classification). Reduced-reporting firms are sold for less cash but receive higher premiums than other targets. We find no evidence (using both stock market and accounting performance metrics) that their acquirers are worse off than other acquirers. Consistent with the rationale that financial reporting alleviates asymmetric information, reduced-reporting firms are targeted later in merger waves relative to their industry peers and subject to a permanent stock price revaluation when M&A deals fail. 

Presentations:  Eastern Finance Association Annual Meeting 2025, Bayes MARC Conference 2024*, Bretton Woods Accounting and Finance Ski Conference 2025*, University of Richmond 2025*, University of Delaware 2024*

Scheduled:  Rutgers University, University of Miami

Nota Bene:  * indicates presentation by co-author