Agency in Intangibles
53 Pages Posted: 16 Sep 2018 Last revised: 25 Apr 2019
Date Written: April 23, 2019
I argue that intangible assets promote agency conflicts between outside investors and inside specialists. I build a microfoundation for why highly intangible firms underinvest despite high profitability and valuations---a challenge for standard theories. This and several other model predictions are supported in the data. I also study trends in investment, profitability, valuations, compensation, idiosyncratic risk, and financing and conclude that the rise of intangibles have likely aggravated agency problems.
Keywords: intangible capital, dynamic contracting, principal-agent, investment
JEL Classification: D21, E22, G31, G32, L22
Suggested Citation: Suggested Citation