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Measuring Intangible Capital with Market Prices

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  • Michael Ewens
  • Ryan H. Peters
  • Sean Wang

Abstract

Existing standards prohibit disclosures of internally created intangible capital to firm balance sheets, resulting in a downward bias of reported assets. To characterize off-balance sheet intangible assets, we use transaction prices to estimate this missing intangible capital. On average, our new measure of intangible capital is 10% smaller than prior estimates, while varying more by industry. These estimates better explain market values, increase HML portfolio returns, act as a better proxy for human capital and brand rankings, and exhibit a strong association with patent values.

Suggested Citation

  • Michael Ewens & Ryan H. Peters & Sean Wang, 2019. "Measuring Intangible Capital with Market Prices," NBER Working Papers 25960, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:25960
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    1. Döttling, Robin & Ratnovski, Lev, 2020. "Monetary policy and intangible investment," Working Paper Series 2444, European Central Bank.

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    More about this item

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital

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