Intangible Value: An International Perspective

Abstract

Existing studies, focused primarily on the U.S., show the improved value factor performance when adjusting book values for intangible assets. However, there is little evidence whether this is a U.S. specific, or wider international phenomenon. My findings expand the existing evidence to multiple international regions and suggest that the intangible-adjusted book-to-market ratio better measures the value factor globally. Especially in more recent decades, where the size of intangible assets increased dramatically, the relative outperformance of the intangible-adjusted value factor over the traditional value factor has become stronger. Economically, the adjusted value factor bears additional risk related to liquidity, financial distress and funding constraints.

Keywords: intangible assets, value factor, book value mismeasurement, risk-premium

JEL Classification: G11, G15