Measuring the value of intangibles

Saskia Clausen and Stefan Hirth

Journal of Corporate Finance, 2016, vol. 40, issue C, 110-127

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.

Keywords: Intangible assets; Corporate valuation; M&A transactions; Asymmetric information; Capital structure (search for similar items in EconPapers)
JEL-codes: G32 G33 G34 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (24)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:40:y:2016:i:c:p:110-127

DOI: 10.1016/j.jcorpfin.2016.07.012

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