Agency in Intangibles
71 Pages Posted: 16 Sep 2018 Last revised: 9 May 2022
Date Written: May 6, 2022
I argue that intangible assets promote agency conflicts between outside investors and inside specialists. Their opacity and specialized nature provide a microfoundation for why highly intangible firms underinvest despite great valuations and profitability---a challenge for first-best theories---by connecting their dynamics to the growth and dispersion of specialists' compensation. The model produces a unified treatment of the economic forces surrounding intangible capital and its predictions are strongly supported in the data.
Keywords: intangible capital, dynamic contracting, investment, compensation
JEL Classification: D21, E22, G31, G32, L22
Suggested Citation: Suggested Citation