Who Do You Trust While Shares are on a Roller-Coaster Ride? Balance Sheet and Patent Data as Sources of Investor Information During Volatile Market Times
34 Pages Posted: 16 Sep 2005
Date Written: September 2005
Abstract
For the first time, we use primary data of German firms to investigate the usefulness of patent data as a source of investor information on the value of a company's intangibles depending on the market cycle (bull/bear market). At first, our results confirm those of earlier US studies in that European patent data make a significant contribution to explaining the market values of companies listed on German exchanges between 1997 and 2002 that exceeds the explanatory power of financial statements prepared according to various types of accounting regimes (German GAAP, IAS and US GAAP). Secondly, they refine existing knowledge by providing original evidence that only patent data are able to provide plausible investor information in both bull-market and bear-market periods, whereas accounting information, depending on the standard used, overvalues intangible assets in bull markets and undervalues them in bears. It seems noteworthy that for the given sample of manufacturing enterprises the explanatory power of the patent variables is not increased by weighting using backward citations or the family size.
Keywords: Investor information, market value, patents
JEL Classification: D82, M41, K11
Suggested Citation: Suggested Citation
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