Intangible capital, corporate valuation and asset pricing

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Serval ID
serval:BIB_1E8453D055DF
Type
Article: article from journal or magazin.
Collection
Publications
Institution
Title
Intangible capital, corporate valuation and asset pricing
Journal
Economic Theory
Author(s)
Danthine Jean-Pierre, Jin Xiangrong
ISSN
0938-2259
1432-0479
Publication state
Published
Issued date
2007
Peer-reviewed
Oui
Volume
32
Number
1
Pages
157-177
Language
english
Abstract
Recent studies have found unmeasured intangible capital to be large and important. In this paper we observe that by nature intangible capital is also very different from physical capital. We find it plausible to argue that the accumulation process for intangible capital differs significantly from the process by which physical capital accumulates. We study the implications of this hypothesis for rational firm valuation and asset pricing using a two-sector general equilibrium model. Our main finding is that the properties of firm valuation and stock prices are very dependent on the assumed accumulation process for intangible capital. If one entertains the possibility that intangible investments translates into capital stochastically, we find that plausible levels of macroeconomic volatility are compatible with highly variable corporate valuations, P/E ratios and stock returns.
Keywords
Intangible capital, Corporate valuation, Stock return volatility
Web of science
Open Access
Yes
Create date
16/07/2018 15:58
Last modification date
01/10/2019 7:17
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