The Tax-adjusted Q Model with Intangible Assets: Theory and Evidence from Temporary Investment Tax Incentives

Sophia Chen () and Estelle Dauchy

No 2014/104, IMF Working Papers from International Monetary Fund

Abstract: We propose a tax-adjusted q model with physical and intangible assets and estimate it with a self-collected comprehensive database of intangible assets. The presence of intangibles changes the accounting and economic measures of q. We show that when tax changes are temporary, the q model can be estimated by adjusting for the firm’s intangible stock and intangible intensity. We estimate our model using temporary investment tax incentive policies in the United States in the early 2000s. When the q-model accounts for intangible assets, the estimated investment elasticity to tax incentives is generally larger than otherwise. It is also larger for intangible-intensive firms, and increases with firm size.

Keywords: WP; book value; cash flow; market value; investment tax incentives; intangible assets; q model of investment; bonus depreciation; intangible intensity; intangible-intensive firm; investment rate; firm level; firm face; Tax incentives; Asset valuation; Investment incentives; Depreciation; Stocks; North America (search for similar items in EconPapers)
Pages: 53
Date: 2014-06-12
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Related works:
Journal Article: Tax‐Adjusted q Model with Intangible Assets: Theory and Evidence from Temporary Investment Tax Incentives (2017)
Working Paper: Tax-adjusted Q Model with Intangible Assets: Theory and Evidence from Temporary Investment Tax Incentives (2014)
Working Paper: Tax-adjusted Q Model with Intangible Assets: Theory and Evidence from Temporary Investment Tax Incentives (2014)
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