Measuring Intangible Capital with Market Prices

72 Pages Posted: 20 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: June 2019

Abstract

Existing standards prohibit disclosures of internally created intangible capital to firm balance sheets, resulting in a downward bias of reported assets. To characterize off-balance sheet intangible assets, we use transaction prices to estimate this missing intangible capital. On average, our new measure of intangible capital is 10% smaller than prior estimates, while varying more by industry. These estimates better explain market values, increase HML portfolio returns, act as a better proxy for human capital and brand rankings, and exhibit a strong association with patent values.

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Suggested Citation

Ewens, Michael and Peters, Ryan H. and Wang, Sean, Measuring Intangible Capital with Market Prices (June 2019). NBER Working Paper No. w25960, Available at SSRN: https://ssrn.com/abstract=3406478

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
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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)

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