The Value of Intellectual Assets in Indian Pharmaceutical Industry: An Empirical Study of the Components of Market Value
28 Pages Posted: 12 Mar 2009
Date Written: March 11, 2009
Intellectual Assets has become the pre-eminent resource for creating economic wealth. Intellectual Assets has contributed to the creation of whole new types of businesses and ways of doing business. In the Knowledge based industries many firms have large amounts of Intellectual Assets such as brand names, patents or employees' expertise. These assets represent a substantial portion of the Market Value of a firm. But the Accounting Standards worldwide are yet to grip with the reality that those investments in Intellectual Assets are 'Capital' investments, and not 'Current' expenses. Consequent to such a treatment, there can be potentially large effects on profitability or book values of many firms. These consequences raise the question whether Stock prices reflected in the Market Value of the firms fully incorporate the value of Intellectual Assets. This question is addressed in depth in this paper, with a focus on the Market Valuation of Intellectual Assets. Further, the series of accounting scandals witnessed by the corporate world has refocused the need for valuation of Intellectual Assets to understand the value component of Intellectual Assets in the Market Value, in order to differentiate the role of 'intellectual investments' and 'other financial information' in driving the Market Value Knowledge based firms. The results of the econometric model specified for the study had succeeded, in its attempt to decipher the value of the components of Market Value. The study has also demonstrated that in Knowledge based industries like the Pharmaceutical industry, the component of Intellectual Assets is substantially integrated with the Market Value.
Keywords: Accounting Standards, Intellectual Assets, Intellectual Property, Knowledge based, Market Value
JEL Classification: C20, C25, C50, L65, O16, O30, O31, O32, O34
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