Inferring the Value of Intangible Assets
Athens University of Economics and Business - Department of Accounting and Finance
Athens University of Economics and Business; City University London - Sir John Cass Business School
Athens University of Economics and Business - Department of Accounting and Finance; Athens University of Economics and Business - Department of Business Administration
March 1, 2012
This paper develops a novel framework for characterizing firms with respect to their intangible assets and investigates their impact on market valuations and operating performance. Our framework is based on a contemporary theoretical Knowledge Management concept, namely Intellectual Capital. We show how to quantify a firm’s Intellectual Capital based on publicly and widely available financials. When we characterize firms with respect to our measure, we find that the most Intellectual Capital intensive firms outperform their least Intellectual Capital intensive firms even two years after they have been characterized. Our measure for Intellectual Capital is also strongly associated with future operating performance. We conclude that investors fail to incorporate intangible assets related information in market valuations and that this failure is more pronounced when a firm possesses broader intangible value.
Number of Pages in PDF File: 54
Keywords: M41, J24, G12, G14
JEL Classification: Intellectual Capital, Intangible Assets, Financial Statement Analysis, Mispricingworking papers series
Date posted: March 19, 2011 ; Last revised: September 4, 2012
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