Resources
Resources is a collection of articles and papers on intangible assets and ESG factors. The collection can be filtered and sorted.
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Franchise value, tobin's q and markups
WAN-CHIEN CHU, RAVI JAGANNATHAN, KEVIN TSENG
We decompose the difference between a firm’s market value and book value into two components: reproducible intangible assets that can be created by competing firms through SG&A/R&D expenditures, and the residual denoted as franchise value which includes the value of transient-rents from capacity-adjustment-costs (Tobin’s Q), longer-lasting franchise rents, and potential...
Tags: Fracnhise Value, Intangibles, Tobins Q
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Trading on talent: human capital and firm performance
ANASTASSIA FEDYK, JAMES HODSON
How is technically skilled human capital reflected in firm performance? We leverage a uniquely detailed employer–employee matched dataset to measure US firms’ technical human capital in information technology (IT), Software Engineering, Mobile Networks, Data Analysis, and Web Development. All five technical skillsets are associated with higher firm valuations. However, they...
Tags: HumanCapital, Intangibles, Skills
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Esg ratings - a compass without direction
DAVID F. LARCKER, LUKASZ POMORSKI, BRIAN TAYAN, AND EDWARD M. WATTS
This is a great review of ESG providers’ scores and how they are sued and iterpreted by the outside world.
Tag: ESG
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Equity investing in the age of intangibles
AMITABH DUGAR AND JACOB POZHARNY
Expenditures on the creation of intangible capital have increased, but accounting standards have not kept pace. We investigated whether this has affected the value relevance of book value and earnings. We constructed a composite measure of intangible intensity by which to classify industries. The measure is based on intangible assets...
Tags: International Intangibles, RnD, US Intangibles
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Measuring corporate culture using machine learning
KAI LI, FENG MAI, RUI SHEN, XINYAN YAN
We create a culture dictionary using one of the latest machine learning techniques—the word embedding model—and 209,480 earnings call transcripts. We score the five corporate cultural values of innovation, integrity, quality, respect, and teamwork for 62,664 firm-year observations over the period 2001–2018. We show that an innovative culture is broader...
Tags: intangibles, machine learning; word embedding; corporate culture; culture
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Understanding weak capital investment: the role of market concentration and intangibles
NICOLAS CROUZET AND JANICE C. EBERLY
We document that the rise of factors such as software, intellectual property, brand, and innovative business processes, collectively known as “intangible capital” can explain much of the weakness in physical capital investment since 2000. Moreover, intangibles have distinct economic features compared to physical capital. For example, they are scalable (e.g.,...
Tags: Industry Concentration, Intangible Capital, Organization Capital, R&D
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Hedging climate change news
ROBERT F. ENGLE, STEFANO GIGLIO, HEEBUM LEE, BRYAN T. KELLY, JOHANNES STROEBEL
We propose and implement a procedure to dynamically hedge climate change risk. We extract innovations from climate news series that we construct through textual analysis of newspapers. We then use a mimicking portfolio approach to build climate change hedge portfolios. We discipline the exercise by using third-party ESG scores of...
Tags: ESG, NLP, climate change, machine learning
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Intangible capital and the investment-q relation
RYAN H. PETERS AND LUCIAN A. TAYLOR
The neoclassical theory of investment has mainly been tested with physical investment, but we show it also helps explain intangible investment. At the firm level, Tobin’s q explains physical and intangible investment roughly equally well, and it explains total investment even better. Compared to physical capital, intangible capital adjusts more...
Tags: Intangible Capital, Investment, Organization Capital, R&D, Tobin’s q
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The value of corporate culture
LUIGI GUISO, PAOLA SAPIENZA, LUIGI ZINGALES
We study which dimensions of corporate culture are related to a firm’s performance and why. We find that proclaimed values appear irrelevant. Yet, when employees perceive top managers as trustworthy and ethical, a firm’s performance is stronger. We then study how different governance structures impact the ability to sustain integrity...
Tags: Culture, Human Capital, Intangibles
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This paper analyzes the relationship between employee satisfaction and long-run stock returns. A value-weighted portfolio of the ‘‘100 Best Companies to Work For in America’’ earned an annual four-factor alpha of 3.5% from 1984 to 2009, and 2.1% above industry benchmarks. The results are robust to controls for firm characteristics,...
Tag: intangibles; human capital; culture
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When is a liability not a liability? textual analysis, dictionaries, and 10-ks
TIM LOUGHRAN, BILL MCDONALD
Previous research uses negative word counts to measure the tone of a text. We show that word lists developed for other disciplines misclassify common words in financial text. In a large sample of 10‐Ks during 1994 to 2008, almost three‐fourths of the words identified as negative by the widely used...
Tags: bag of words, textual analysis
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