The Efficiency of Marketing and Stock Returns

Ang, Tze Chuan; Chordia, Tarun; Anh, Van; Singh, Harminder

doi:10.2139/ssrn.3224925

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2021

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“…The second characteristic is hard‐to‐measure. Intangible assets, such as human capital, company culture, innovation efficiencies, or marketing efficiencies, tend to be unobservable and generally hard to quantify (Pantzalis and Park, 2009; Hirshleifer et al ., 2013; Huang et al ., 2015; Ang et al ., 2019). This intangibility makes intangible assets less salient and, thus, investors easily pass the information contained in intangible assets.…”

Section: Literature Reviewmentioning

confidence: 99%

Intangible Capital and Market Reactions to Earnings News*

Jung

Kho

2021

Asia-Pac J of Fin Stud

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We investigate how market reactions to earnings news differ between U.S. firms with high and low intangible capital. We expect investors to have difficulty processing information on earnings news for firms with high intangible capital, leading to a larger reaction to earnings news. Measuring intangible capital as the accumulated sum of externally purchased and internally created intangible assets, we show that both immediate and delayed market reactions to earnings news are larger for high-intangible firms. Multivariate regressions and four-factor alphas support the results. This effect is more substantial for firms with limited investor attention and mainly driven by organization capital.

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