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Pricing the missing intangible capital: Evidence from the China A‐share market

Author

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  • Jing Chen
  • Tianyuan Jiang
  • Manling Zhang
  • Huixuan Li

Abstract

This study develops novel proxies for firm‐level intangible capital in China's A‐share market and assesses its pricing implications. We compile intangible capital from relevant expenditure entries detailed in the notes of financial statements and assess them using perpetual inventory methods, accounting for industry‐specific variations. Our findings reveal a significant positive intangible capital premium. Additionally, the intangible capital factor substantially improves the performance of the Fama–French three‐ and five‐factor models, and other widely accepted pricing models. This research contributes to the broader understanding of modern production paradigms that increasingly rely on intangible assets and investigates their valuation implications in financial markets.

Suggested Citation

  • Jing Chen & Tianyuan Jiang & Manling Zhang & Huixuan Li, 2024. "Pricing the missing intangible capital: Evidence from the China A‐share market," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 64(5), pages 4593-4618, December.
    • Handle: RePEc:bla:acctfi:v:64:y:2024:i:5:p:4593-4618
    DOI: 10.1111/acfi.13294
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