Misvaluation of New Trademarks

67 Pages Posted: 15 Aug 2018 Last revised: 15 Jan 2019

See all articles by Po-Hsuan Hsu

Po-Hsuan Hsu

University of Hong Kong

Dongmei Li

University of South Carolina - Darla Moore School of Business - Department of Finance

Siew Hong Teoh

University of California, Irvine - Accounting Area

Kevin Tseng

University of Kansas School of Business

Date Written: January 14, 2019

Abstract

We examine valuation of one type of intangible assets, trademarks, which are registered when new products/services are commercially in use. We find that firms with more newly registered trademarks earn significantly higher future abnormal stock returns, which are largest for the first year after registration. The return predictability is stronger in harder-to-value firms: larger, more opaque firms; firms with higher analyst earnings forecast dispersion, lower advertising expenses, and higher R&D spending; and firms with trademarks in new product/service categories. The evidence suggests that the stock market undervaluation of new trademarks is greater where the costs of paying attention is higher.

Keywords: Trademarks, Exploratory Trademarks, Stock Returns, Limited Attention, Uncertainty, Market Efficiency

JEL Classification: E22, G11, G12, G14, O34, M31

Suggested Citation

Hsu, Po-Hsuan and Li, Dongmei and Teoh, Siew Hong and Tseng, Kevin, Misvaluation of New Trademarks (January 14, 2019). Available at SSRN: https://ssrn.com/abstract=3224187 or http://dx.doi.org/10.2139/ssrn.3224187

Po-Hsuan Hsu

University of Hong Kong ( email )

Pokfulam Road
Hong Kong
China

Dongmei Li

University of South Carolina - Darla Moore School of Business - Department of Finance ( email )

1014 Greene Street
Columbia, SC 29208
United States

Siew Hong Teoh

University of California, Irvine - Accounting Area ( email )

Irvine, CA 92697-3125
United States

Kevin Tseng (Contact Author)

University of Kansas School of Business ( email )

4136 Capital Federal Hall
1654 Naismith Dr
Lawrence, KS 66045
United States
785-864-1683 (Phone)

HOME PAGE: http://business.ku.edu/kevin-tseng

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