Intangibles, firm value, and accounting relevance in COVID-19

Feng Gu

Chapter 5 in Handbook on Intangibles, 2026, pp 90-119 from Edward Elgar Publishing

Abstract: This chapter examines intangibles during the COVID-19 period. Prior research has found that intangibles are potent drivers of firm performance and that the rise of intangibles in the economy is associated with the decline of accounting relevance over time. The results of this study demonstrate that the COVID-19 crisis did not disrupt the momentum of firms’ intangible investment and that intangibles were a major firm performance differentiator in the period of COVID-19. The advantage of high-intangibles firms over low-intangibles firms in sales growth, gross margin growth, stock performance, and earnings uncertainty were substantially greater in 2020–2021 than in pre-pandemic years. The evidence of this entry also indicates that the relevance of widely-used accounting numbers, such as earnings and book value, continued to decline during the period of COVID-19 and reached new lows. The loss of earnings relevance was particularly steep for high-intangibles firms in the COVID-19 period. This chapter explores three fundamental forces responsible for the rise of intangible dominance and the accelerated loss of accounting relevance in the COVID-19 period, including large and sustained increases in intangible investment before COVID-19, the innate scalability and synergies of intangibles that differentiate intangible assets from their tangible counterpart, and the stagnant U.S. accounting standard-setting that has ignored the value-enhancing effects of firms’ intangible investment for decades.

Keywords: Intangibles; Firm performance; COVID-19; Accounting relevance; Intangible investment (search for similar items in EconPapers)
Date: 2026
ISBN: 9781035306367
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