Decomposing firm value

Frederico Belo, Vito D. Gala, Juliana Salomao and Maria Ana Vitorino

Journal of Financial Economics, 2022, vol. 143, issue 2, 619-639

Abstract: What are the economic determinants of a firm’s market value? We answer this question through the lens of a generalized neoclassical model of investment with quasi-fixed labor and three heterogeneous capital inputs. We estimate the structural model using firm-level data on US firms and find that, on average and depending on the industry, installed labor force accounts for 14–21% of firms’ market value, physical capital accounts for 30–40%, knowledge capital accounts for 20–43%, and brand capital accounts for 6–25%. Our analysis provides direct empirical evidence for the importance of labor and intangible capital inputs for understanding firm value.

Keywords: Valuation; Neoclassical investment; Structural estimation; Intangibles (search for similar items in EconPapers)
JEL-codes: D21 D22 E22 E24 G12 G32 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (17)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:143:y:2022:i:2:p:619-639

DOI: 10.1016/j.jfineco.2021.08.007

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