Supply and Demand of Information Influencing Firm Valuation

Abstract

Abstract: The concept that accounting represents the information economics of the firm is a premise for the allocation of scarce resources. The analysis starts with a clean surplus model as a basis for the conceptual framework. Then, theoretical firm information economic supply-and-demand features are incorporated within a path diagram. This framework is investigated empirically with simultaneous regression equations and a structural equation model (SEM). Equations have explanatory power irrespective of the statistical methodology. And, a latent variable measure of internally generated intangible assets positively and significantly affects net income. Sensitivity subsamples investigate size and risk factors for robustness. Thus, the study expands the research frontier for SEM financial accounting research.

Keywords: Information Economics, SEM, Intangible Assets

JEL Classification: C5, G12, M00