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Document Type

Article Restricted

Publication Date

10-2016

Journal Title

Journal of Corporate Finance

Volume Number

40

First Page

110

Last Page

127

DOI

doi.org/10.1016/j.jcorpfin.2016.07.012

Abstract

We propose a new earnings-based measure for the value of intangibles. To validate this measure, we compare it to commonly used proxies for intangible intensity, such as R&D expenses. While R&D expenses measure the investment in new intangibles, our new measure gauges the productivity of already existing intangibles. We show that our new measure serves as an additional factor to explain firm value, measured either as market capitalization or acquisition prices in M&A transactions. Moreover, it captures the increasing importance of intangibles over time. Finally, we present a specific application of our intangible-intensity measure in the context of capital structure. We find that more intangible-intensive firms have lower leverage.

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