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A Simple Approach to Valuing Intangibles and Rents

Author

Listed:
  • Wan-Chien Chiu
  • Ravi Jagannathan
  • Yo-Lan Lin
  • Kevin Tseng

Abstract

We decompose the gap between a firm’s market and book values into capitalized-intangible-assets and a residual, consisting of value of capacity-adjustment-costs, economic-rents and potential mispricing. Our estimated parameter-values for capitalizing expenditures creating intangible-assets are consistent with values reported in the literature, even though we use a different approach. Firms with higher residuals have higher profitability and markups, lower labor share, face fewer product market threats, exhibit less sensitivity of investment to traditional as well as intangibles-adjusted Tobin’s Q, and benefited more from globalization during this century. This is consistent with there being a significant ex post rents-component in the residual.

Suggested Citation

  • Wan-Chien Chiu & Ravi Jagannathan & Yo-Lan Lin & Kevin Tseng, 2023. "A Simple Approach to Valuing Intangibles and Rents," NBER Working Papers 30829, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:30829
    Note: AP
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    More about this item

    JEL classification:

    • G0 - Financial Economics - - General
    • G00 - Financial Economics - - General - - - General
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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