Market valuation of intangible assets

Won W. Choi, Sung S. Kwon, Gerald J. Lobo

Research output: Contribution to journalArticle

34 Citations (Scopus)

Abstract

Whether information on intangible assets reported under current financial reporting requirements conveys information that is relevant to market participants’ valuation of firms’ equity has long been a question of interest to accounting policymakers and researchers. This study provides empirical evidence on the relationship between the reported value of intangible assets, the associated amortization expense, and firms’ equity market values. These relationships are examined using a matched pair portfolio analysis and multiple regression analysis that has been used in prior research on this topic. The results indicate that the financial market positively values reported intangible assets. Furthermore, consistent with theoretical predictions, the market’s valuation of a dollar of intangible assets is lower than its valuation of other reported assets. The results also indicate that, although the market values amortization expense differently from other expenses reported in the income statement, it does not negatively value amortization expense. These results support the current requirement that intangible assets be reported in firms’ balance sheets. However, they do not support the current requirement that intangible assets be periodically amortized to reflect the assumed decline in their value. J BUSN RES 2000. 49.33-45.

Original languageEnglish
Pages (from-to)35-45
Number of pages11
JournalJournal of Business Research
Volume49
Issue number1
DOIs
Publication statusPublished - 2000 Jul

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Market valuation
Intangible assets
Expenses
Market value
Information requirements
Multiple regression analysis
Balance sheet
Financial markets
Assets
Portfolio analysis
Equity
Equity markets
Politicians
Income
Prediction
Empirical evidence
Financial reporting

All Science Journal Classification (ASJC) codes

  • Marketing

Cite this

Choi, Won W. ; Kwon, Sung S. ; Lobo, Gerald J. / Market valuation of intangible assets. In: Journal of Business Research. 2000 ; Vol. 49, No. 1. pp. 35-45.
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Market valuation of intangible assets. / Choi, Won W.; Kwon, Sung S.; Lobo, Gerald J.

In: Journal of Business Research, Vol. 49, No. 1, 07.2000, p. 35-45.

Research output: Contribution to journalArticle

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