Measuring the value of intangibles |
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| Institution: | 1. Department of Business and Economics, University of Southern Denmark, Campusvej 55, Odense M, DK–5230, Denmark;2. Aarhus BSS, Aarhus University, Department of Economics and Business Economics, Fuglesangs Allé 4, Aarhus V, DK–8210, Denmark;1. Newcastle University Business School, Newcastle University, Newcastle upon Tyne NE1 4SE, UK;2. Portsmouth Business School, University of Portsmouth, Portsmouth PO1 3DE, UK;3. Department of Economics, University of Thessaly, Korai 43, 38333 Volos, Greece;1. Florida Atlantic University, College of Business, Boca Raton, FL 33431, United States;2. University of Missouri, Trulaske College of Business, Columbia, MO 65201, United States;3. Nanyang Technological University, Nanyang Business School, Singapore 639798, Singapore;1. Department of Economics and Finance, La Trobe Business School, La Trobe University, Australia;2. Department of Finance, Deakin Business School, Deakin University, Australia |
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| Abstract: | We propose a new earnings-based measure for the value of intangibles. To validate this measure, we compare it to commonly used proxies for intangible intensity, such as R&D expenses. While R&D expenses measure the investment in new intangibles, our new measure gauges the productivity of already existing intangibles. We show that our new measure serves as an additional factor to explain firm value, measured either as market capitalization or acquisition prices in M&A transactions. Moreover, it captures the increasing importance of intangibles over time. Finally, we present a specific application of our intangible-intensity measure in the context of capital structure. We find that more intangible-intensive firms have lower leverage. |
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