Acquisition Prices and the Measurement of Intangible Capital

74 Pages Posted: 27 Nov 2018 Last revised: 16 Jun 2019

See all articles by Michael Ewens

Michael Ewens

California Institute of Technology - Division of the Humanities and Social Sciences; National Bureau of Economic Research (NBER)

Ryan H. Peters

Tulane University - Finance & Economics

Sean Wang

Southern Methodist University

Multiple version iconThere are 3 versions of this paper

Date Written: May 31, 2019

Abstract

We use 1,521 acquisition purchase price allocations to estimate intangible capital stocks. The estimated depreciation of knowledge capital (R&D) is 32%, some 28% of SG&A represents investment in organizational capital and parameter estimates exhibit significant industry variation. Aggregating these accounts, 75% of intangibles come from organizational capital, and total stocks are 10% smaller versus stocks using prior parameters. Adjusting for intangibles, average market-to-book falls from 1.74 to an average of one. Relative to existing approaches, our stocks improve the explanatory power of enterprise value, human capital and brand rankings, while exhibiting the expected correlations with patent valuations and investment rates.

Keywords: Intangible capital, acquisitions, organization capital, depreciation, knowledge capital, R&D

JEL Classification: G30, G32, G34,O34

Suggested Citation

Ewens, Michael and Peters, Ryan H. and Wang, Sean, Acquisition Prices and the Measurement of Intangible Capital (May 31, 2019). Available at SSRN: https://ssrn.com/abstract=3287437 or http://dx.doi.org/10.2139/ssrn.3287437

Michael Ewens (Contact Author)

California Institute of Technology - Division of the Humanities and Social Sciences ( email )

1200 East California Blvd.
Pasadena, CA 91125
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Ryan H. Peters

Tulane University - Finance & Economics ( email )

A.B. Freeman School of Business
7 McAlister Drive
New Orleans, LA 70118
United States

Sean Wang

Southern Methodist University ( email )

P.O. Box 750333
Dallas, TX 75275-0333
United States
2147682858 (Phone)

Register to save articles to
your library

Register

Paper statistics

Downloads
240
Abstract Views
1,076
rank
119,074
PlumX Metrics