Intangible Capital and the Investment-q Relation

Peters, Ryan H.; Taylor, Lucian A.

doi:10.2139/ssrn.2405231

Cited by 29 publications

(73 citation statements)

References 62 publications

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“…To assess firm performance, we used the Total Q measure proposed by Peters and Taylor (2017). This proxy represents an improvement on Tobin's Q that also includes intangible capital in the denominator (i.e., as part of the replacement cost of firms' capital), reflecting the fact that intangible assets have become more important for firms in the 21st century.…”

Section: B Variables Of Interestmentioning

confidence: 99%

CEO Duality and Firm Performance: Does Economic Policy Uncertainty Mediate the Relation?

2018

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Exploiting two exogenous shocks, we examine the relation between CEO–Chairman duality and firm performance. We report evidence that CEO duality benefits a firm when economic policy uncertainty is high. This implies that CEO–‐Chairman duality is an advantageous governance mechanism for coping with economic policy uncertainty. We show that the Sarbanes‐Oxley Act reduced firm performance if a firm had separate leadership in 2001. However, this negative effect was mitigated if a firm had combined leadership in 2001. The results suggest that CEO duality is complementary to board independence and that the value of CEO duality is contingent on a firm’s environment.

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Section: B Variables Of Interestmentioning

confidence: 99%

CEO Duality and Firm Performance: Does Economic Policy Uncertainty Mediate the Relation?

2018

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“…Corporate accounting data are from Compustat. To measure average market prices of public firms I calculate an average measure of Tobin's q that incorporates intangible assets in the denominator from Peters and Taylor (2016). Market returns (r m t,t+1 ) are value weighted and measured over the following year and are calculated using the CRSP universe.…”

Section: Portfolio Company Sample Resultsmentioning

confidence: 99%

Volatility and Venture Capital

Peters

2017

SSRN Journal

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The performance of venture capital (VC) investments load positively on shocks to aggregate return volatility. I document this novel source of risk at the asset-class, fund, and portfolio-company levels. The positive relation between VC performance and volatility is driven by the option-like structure of VC investments, especially by VCs' contractual option to reinvest. At the asset-class level, shocks to aggregate volatility explain a substantial fraction of VC returns. At the fund level, consistent with the reinvestment channel, this exposure is concentrated in years two through four of fund life and in early-stage VC funds, which have more embedded reinvestment options. For VC-backed portfolio companies, volatility shocks correlate with faster and more frequent reinvestment. The level of volatility at the time of investment has no relation with future performance, consistent with competitive markets. Overall, my results imply that the option-like features of VC investments are first-order determinants of risk in VC. Abstract:The performance of venture capital (VC) investments load positively on shocks to aggregate return volatility. I document this novel source of risk at the asset-class, fund, and portfolio-company levels. The positive relation between VC performance and volatility is driven by the option-like structure of VC investments, especially by VCs' contractual option to reinvest. At the asset-class level, shocks to aggregate volatility explain a substantial fraction of VC returns. At the fund level, consistent with the reinvestment channel, this exposure is concentrated in years two through four of fund life and in early-stage VC funds, which have more embedded reinvestment options. For VC-backed portfolio companies, volatility shocks correlate with faster and more frequent reinvestment. The level of volatility at the time of investment has no relation with future performance, consistent with competitive markets. Overall, my results imply that the option-like features of VC investments are first-order determinants of risk in VC.JEL codes: G11, G24

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“…Taxable income is defined as pretax income (PI) as in Hanlon et al (2019). Total investment is defined as physical investments (CAPX) plus intangible investment, which is defined as in Peters and Taylor (2017) to include R&D and a portion of selling, general, and administrative expenses (SG&A). The analysis excludes firms with no or blank investment in the data.…”

Section: Explanation and Commentarymentioning

confidence: 99%

“…Data correspond to estimates of Corrado and Hulten (2010) made using perpetual inventory method. For 2007 to 2013, I tack on the estimates using Peters and Taylor (2017), who use a similar methodology for public companies.…”

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confidence: 99%

Does Capital Bear the U.S. Corporate Tax After All? New Evidence from Corporate Tax Returns

Fox¹

2020

J Empirical Legal Studies

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This article uses U.S. corporate tax return data to assess how government revenue would have changed if, over the period 1957–2013, corporations had been subject to a hypothetical corporate cash flow tax—that is, a tax allowing for the immediate deduction of investments in long‐lived assets like equipment and structures—rather than the corporate tax regime actually in effect. Holding taxpayer behavior fixed, the data indicate actual corporate tax revenue over the most recent period (1995–2013) differed little from that under the hypothetical cash flow tax. This result has three important implications. First, capital owners appear to bear a large fraction of the corporate tax today. This is because economic theory holds that corporate cash flow taxes are largely borne by capital owners and my result implies that the actual tax behaves in practice much like a cash flow tax. This theory is embodied in the Treasury's most recent model of corporate tax incidence. Applying the model to my results implies that only a small portion (2–10 percent) of the U.S. corporate tax was borne by labor in the years before the 2017 Act and thus capital providers are the primary beneficiaries of the Act's large corporate rate cut. Second, the results suggest that the United States could switch fully over to a cash flow tax, which is likely to be administratively simpler for both the government and corporations, at relatively low revenue cost. Third, the impact of fully switching to a cash flow tax on the operations of the real economy and its efficiency are likely to be fairly small. This is precisely because the corporate tax has already evolved to largely mimic a cash flow tax, and the article explores the reasons underlying this evolution using a novel dataset.

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Intangible Capital and the Investment-q Relation

Cited by 29 publications

References 62 publications

CEO Duality and Firm Performance: Does Economic Policy Uncertainty Mediate the Relation?

CEO Duality and Firm Performance: Does Economic Policy Uncertainty Mediate the Relation?

Volatility and Venture Capital

Does Capital Bear the U.S. Corporate Tax After All? New Evidence from Corporate Tax Returns

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