The Measurement of Firm-Specific Organization Capital
We develop a firm-specific measure of organization capital and estimate it for a sample of approximately 250 companies. We test the validity of the organization capital measure within a widely used investment valuation model and show that our organization capital estimate contributes significantly to the explanation of market values of firms, beyond assets in place and expected abnormal earnings (growth potential). We then examine whether capital markets are efficient with respect to organization capital, namely whether stock prices fully reflect the value of this resource. We find that while investors recognize the importance of organization capital, they do not fully factor its value into equity prices. We ascribe this fault or market inefficiency to poor disclosure of information about intangible capital.
|Date of creation:||Mar 2003|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.nber.org
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Fama, Eugene F & French, Kenneth R, 1992. " The Cross-Section of Expected Stock Returns," Journal of Finance, American Finance Association, vol. 47(2), pages 427-65, June.
- Louis K. C. Chan, 2001. "The Stock Market Valuation of Research and Development Expenditures," Journal of Finance, American Finance Association, vol. 56(6), pages 2431-2456, December.
- Andrew Atkeson & Patrick J. Kehoe, 2002. "Measuring Organization Capital," NBER Working Papers 8722, National Bureau of Economic Research, Inc.
- Ericson, Richard & Pakes, Ariel, 1995. "Markov-Perfect Industry Dynamics: A Framework for Empirical Work," Review of Economic Studies, Wiley Blackwell, vol. 62(1), pages 53-82, January.
- Prescott, Edward C & Visscher, Michael, 1980. "Organization Capital," Journal of Political Economy, University of Chicago Press, vol. 88(3), pages 446-61, June.
- Bronwyn H. Hall., 1993.
"Industrial Research During the 1980s: Did the Rate of Return Fall?,"
Economics Working Papers
93-217, University of California at Berkeley.
- Hall, Bronwyn H., 1993. "Industrial Research During the 1980s: Did the Rate of Return Fall?," Department of Economics, Working Paper Series qt33d879r9, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- Charles R. Hulten, 2000. "Total Factor Productivity: A Short Biography," NBER Working Papers 7471, National Bureau of Economic Research, Inc.
- Jovanovic, Boyan, 1979.
"Job Matching and the Theory of Turnover,"
Journal of Political Economy,
University of Chicago Press, vol. 87(5), pages 972-90, October.
- Brown, Stephen & Lo, Kin & Lys, Thomas, 1999. "Use of R2 in accounting research: measuring changes in value relevance over the last four decades," Journal of Accounting and Economics, Elsevier, vol. 28(2), pages 83-115, December.
- Fama, Eugene F. & French, Kenneth R., 1993. "Common risk factors in the returns on stocks and bonds," Journal of Financial Economics, Elsevier, vol. 33(1), pages 3-56, February.
- Rosen, Sherwin, 1972. "Learning by Experience as Joint Production," The Quarterly Journal of Economics, MIT Press, vol. 86(3), pages 366-82, August.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:9581. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.