How do intangible assets create economic value? an application to banks

Alfredo Martin-Oliver and Vicente Salas-Fumas ()
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Vicente Salas-Fumas: Banco de España

No 730, Working Papers from Banco de España

Abstract: This paper examines the determinants of economic value and investment behavior of Spanish banks under the theory of investment for a multi-asset firm, focusing on three key issues: i) the distinction between immaterial and intangible assets and how each of them is related to the economic value of the firm; ii) the test of whether the accumulation of intangibles is a consequence of incurring adjustment costs or, on the contrary, intangibles are accumulated at no cost; iii) how to account for market power in the valuation of the multi-assets firm. The empirical results quantify the contribution of material, immaterial (information technology and advertising) and intangible (organization capital) assets to economic value of Spanish banks, separated from the contribution of market power. We find that intangible assets build up from adjustment costs of investments in IT and rents from market power split evenly the economic value of the bank above the replacement cost of material and immaterial assets.

Keywords: Intangibles; IT capital; adjustment costs; valuation of banks; investment of banks (search for similar items in EconPapers)
JEL-codes: D21 G21 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2007-10
New Economics Papers: this item is included in nep-ban and nep-bec
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:bde:wpaper:0730

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