The Impact of Intangible Assets on the Market Value of Companies: Cross-Sector Evidence

Abstract

The impact of corporate intangibles on a company’s market value has been a widely debated topic. A large body of literature has separately examined the industry’s effect- or firm-specific attributes, such as industry type, company size, company age, or indebtedness and profitability, on the motivation to disclose information on intangible assets, but without considering a comprehensive view. This paper examines the role intangible assets play in a firm’s market valuation besides other firm-specific characteristics. The reducted dataset we use in this study comprises 250 publicly traded companies operating in four different business sectors in France, Germany, and Switzerland for the ten years from 2009 to 2018. Based on the panel data regression models, the study provides an extension of previous knowledge about the effect intangible assets may have on the investors’ view of a company’s value, where the value added of this paper is the empirical evidence of a possible link between the intangible assets’ disclosure and the market value of German, French, and Swiss enterprises. The importance of our contribution lies in a comparative analysis carried out to reveal substantial differences in the impact of intangible assets and innovation activity on the market value firms in three European countries and across four industry sectors. Although the results show the positive impact of intangible assets on the companies’ market value, we suggest that investors still assess companies based on their profitability rather than considering the information on intangible assets the enterprises disclose in their financial statements.

Novel Configuration of Formulary Apportionment Using the Correlated Random Effect Approach

“…Roggeman et al (2012) elaborated that the current accounting methods used under the International Financial Reporting Standards (IFRS) require most intangibles to be expensed and, as a consequence, capitalized intangibles do not reflect how valuable intangible assets are for many companies. Dancaková et al (2022) argued that due to the persistent conservatism of the IFRS, the actual value of intangible assets cannot be fully recognized and disclosed in financial statements. Taking into consideration that various definitions of intangible assets are employed in the field of taxation, accountancy and transfer pricing of multinational companies, it is hypothesised that intangible assets are undervalued in financial statements.…”

The Motive Behind International Diversification Acquisition by Business Group

“…Based on the resource-based theory, it is suggested that business groups are more likely to engage in acquisitions when moderated by high levels of intangible assets (Carabel et al, 2021). Therefore, when business groups possess a substantial amount of intangible assets, they are better equipped to pursue and manage diversified international acquisitions, leveraging their strategic resources to enter new markets and industries (Dancaková et al, 2022). These findings have important implications for businesses and investors.…”

Intellectual Capital And Firm Value: Moderating Roles Of Tax Incentives In R&D

“…Hence, it helps the company consider its position in market competition and competitiveness (Aprilianda & Nur, 2023). It also can guide the manager in making strategic decisions to increase the company's worth (Dancaková et al, 2022). Hence, investigating the determinant of the firm value can benefit both the company and the investor.…”