Measuring Intangible Capital with Market Prices

Ewens, Michael; Peters, Ryan H.; Wang, Sean

doi:10.31235/osf.io/kvp2f

Cited by 11 publications

(4 citation statements)

References 39 publications

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“…First, we use the organization capital measure of Eisfeldt and Papanikolaou (2013), which employs deflated values of SG&A expenses. Second, we use the organization capital measure of Ewens et al. (2020), which employs industry-level parameter estimates (fraction of SG&A and depreciation rates) in estimating organization capital (OC/TA_EPW).…”

Section: Empirical Findings and Discussionmentioning

confidence: 99%

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Organization capital and firm risks

Hasan

Cheung

2023

CAFR

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PurposeThis paper aims to investigate how organization capital influences different forms of corporate risk. It also explores how the relationship between organization capital and risks varies in the cross-section of firms.Design/methodology/approachTo test the hypothesis, this study employs the ordinary least-squares (OLS) regression model using a large sample of the United States (US) data over the 1981–2019 period. It also uses an instrumental variable approach and an errors-in-variables panel regression approach to mitigate endogeneity problems.FindingsThe empirical results show that organization capital is positively related to both idiosyncratic risk and total risk but negatively related to systematic risk. The cross-sectional analysis shows that the positive relationship between organization capital and idiosyncratic risk is significantly more pronounced for the subsample of firms with high information asymmetry and human capital. Moreover, the negative relationship between organization capital and systematic risk is significantly more pronounced for firms with greater efficiency and firms facing higher industry- and economy-wide risks.Practical implicationsThe findings have important implications for investors and policymakers. For example, since organization capital increases idiosyncratic risk and total risk but reduces systematic risk, investors should take organization capital into account in portfolio formation and risk management. Moreover, the findings lend support to the argument on the recognition of intangible assets in financial statements. In particular, the study suggests that standard-setting bodies should consider corporate reporting frameworks to incorporate the disclosure of intangible assets into financial statements, particularly given the recent surge of corporate intangible assets and their critical impact on corporate risks.Originality/valueTo the best of the knowledge, this is the first study to adopt a large sample to provide systematic evidence on the relationship between organization capital and a wide range of risks at the firm level. The authors show that the effect of organization capital on firm risks differs remarkably depending on the kind of firm risk a particular risk measure captures. This study thus makes an original contribution to resolving competing views on the effect of organization capital on firm risks.

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Section: Empirical Findings and Discussionmentioning

confidence: 99%

“…Finally, in the sensitivity test, we use the organization capital measure of Ewens, Peters, and Wang (2020), which employs industry-level parameter estimates (fraction of SG&A and depreciation rates) in estimating organization capital (OC/TA_EPW).…”

Section: Methodsmentioning

confidence: 99%

Organization capital and firm risks

Hasan

Cheung

2023

CAFR

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“…Finally, it is possible that acquisition premium includes over/under payment or synergy values. Following Bhagat et al (2005) and Ewens et al (2020), I calculate premium adjusted for over-payment/synergy and get similar results.…”

Section: The Impact Of Advertising Expenditure Type On Acquisition Pr...mentioning

confidence: 90%

Digital versus Traditional Advertising and the Recognition of Brand Intangible Assets

Song

2024

SSRN Journal

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“…We first consider the following firm-level variables: the Amihud Illiquidity measure which is the ratio of absolute daily stock return to the daily trading volume (in dollars); Stock Volatility (the total return volatility); Log Market Cap (the logarithm of market capitalization); # 8K Reports, which is the number of 8K reports filed each year and represents the volume of available information about the firm; and Intangible Assets, defined as the average of three proxies: one minus the ratio of PP&E to assets, organization capital scaled by assets, and knowledge capital scaled by assets. The last two measures, derived from the accumulation of SG&A and R&D expenditures, are constructed following Ewens, Peters, and Wang (2020).…”

Section: Potential Factors For the Relative Performance Of Ai And Hum...mentioning

confidence: 99%

From Man vs. Machine to Man + Machine: The art and AI of stock analyses

Cao,

Jiang,

Wang

et al. 2024

Journal of Financial Economics

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Measuring Intangible Capital with Market Prices

Cited by 11 publications

References 39 publications

Organization capital and firm risks

Organization capital and firm risks

Digital versus Traditional Advertising and the Recognition of Brand Intangible Assets

From Man vs. Machine to Man + Machine: The art and AI of stock analyses

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