The COVID-19 pandemic has had a significant impact on the investment strategies of corporations worldwide. This has led to many companies reevaluating and adjusting their investment approaches in ...response to the changing business landscape. To understand these shifts, this article used a paired t-test methodology to analyse changes in various financial components, including accounts receivables, inventory, fixed assets, and intangible assets, from 2019 to 2021. The study also examined the proportion of each of these components in the total assets of the companies under investigation. The findings revealed a consistent upward trajectory in the aforementioned asset categories, even during the pandemic outbreak. This implied that companies continued to invest in these areas, which may have been less affected by the pandemic. However, apart from intangible assets, the proportion of the remaining asset categories in the total assets of these companies experienced a decline. The article suggested that companies may change their investment priorities or reallocate resources in response to changing economic conditions brought on by the epidemic. Therefore, it is beneficial to improve the overall performance of the company through efficient use of resources.
The paper studies the accounting of recognition of research and development costs as intangible assets of Lithuanian companies. This study aims to reveal the possibilities of recognizing research and ...development costs as intangible assets in accounting. The biggest problem arises when the company itself decides to create intangible assets. These costs must be classified as research and development costs in accordance with the requirements of international and business accounting standards. The emerging problems and uncertainties regarding the criteria for recognizing intangible assets are still not resolved. These assets are recognized only when the company can demonstrate future economic benefits, determine their value, and control them. The results of the study showed that companies have various types of research and development costs, but they are not considered suitable for recognition as intangible assets in the statement of financial position Keywords: research, development, intangible assets, accounting.
Intangible assets and capital structure Lim, Steve C.; Macias, Antonio J.; Moeller, Thomas
Journal of banking & finance,
September 2020, 2020-09-00, Volume:
118
Journal Article
Peer reviewed
•Identifiable intangible assets support debt financing as much as tangible assets do.•It is important to distinguish among different types of intangible assets.•New data used are granular ...market‐based valuations of intangible assets.
A substantial and increasing proportion of corporate assets consists of intangible assets. Despite their growing importance, internally-generated intangible assets are largely absent from balance sheets and other corporate reports. Consequently, the empirical capital structure research has struggled to evaluate the effects of intangible assets on financial leverage. High valuation risk and poor collateralizability of some intangible assets — e.g. goodwill, may discourage debt financing. In contrast, identifiable intangible assets may support debt because they are separately identifiable, valuable, and potentially collateralizable, and are instrumental in generating cash flows. Utilizing a recent accounting rule change that allows us to observe granular market-based valuations of intangible assets, we find a strong positive relation between identifiable intangible assets and leverage. Overall, identifiable intangible assets support debt financing as much as tangible assets do, in particular in firms that lack abundant tangible assets.
The neoclassical theory of investment has mainly been tested with physical investment, but we show that 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 with physical capital, intangible capital adjusts more slowly to changes in investment opportunities. The classic q theory performs better in firms and years with more intangible capital: Total and even physical investment are better explained by Tobin’s q and are less sensitive to cash flow. At the macro level, Tobin’s q explains intangible investment many times better than physical investment. We propose a simple, new Tobin’s q proxy that accounts for intangible capital, and we show that it is a superior proxy for both physical and intangible investment opportunities.
Intangible assets, like patents and trademarks, are increasingly seen as the key to competitive success and as the drivers of corporate profit. Moreover, they constitute a major source of profit ...shifting opportunities in multinational enterprises (MNEs) due to a highly intransparent transfer pricing process. This paper argues that, for both reasons, MNEs have an incentive to locate intangible property at affiliates with a relatively low corporate tax rate. Using panel data on European MNEs and controlling for unobserved time–constant heterogeneity between affiliates, we find that the lower a subsidiary's corporate tax rate relative to other affiliates of the multinational group the higher is its level of intangible asset investment. This effect is statistically and economically significant, even after controlling for subsidiary size and accounting for a dynamic intangible investment pattern.
► MNEs have an incentive to locate valuable & mobile intangibles at low-tax entities. ► We quantify the responsiveness of intangible assets using data on MNEs in EU25. ► The tax measure captures the affiliates' tax burden relative to other group members. ► Conditioning on affiliate size, we find a significant semi-elasticity of –1.7.
ABSTRACT
In recent years, U.S. investment has been lackluster, despite rising valuations. Key explanations include growing rents and growing intangibles. We propose and estimate a framework to ...quantify their roles. The gap between valuations—reflected in average Q—and investment—reflected in marginal q—can be decomposed into three terms: the value of installed intangibles; rents generated by physical capital; and an interaction term, measuring rents generated by intangibles. The intangible related terms contribute significantly to the gap, particularly in fast‐growing sectors. Our findings suggest care in a pure‐rents interpretation, given the rising role of intangibles.
•Agent-based macro model to address micro-macro effects of the digital transformation.•Digital-asset competitiveness leads to higher productivity.•Converse concentration effect: concentrated digital ...markets with low average prices.•Long-term technological unemployment due to increasing digital assets productivity.
During the last decades, we have witnessed a strong development of intangible digital technologies. Software, artificial intelligence and algorithms are increasingly affecting both production systems and our lives; economists have started to figure out the long-run complex economic implications of this new technological wave. In this paper, we address this question through the agent-based modelling approach. In particular, we enrich the macroeconomic model Eurace with the concept of intangible digital technology and investigate its effects both at the micro and macro level. Results show the emergence of the relevant stylized facts observed in the business domain, such as increasing returns, winner-take-most phenomena and market lock-in. At the macro level, our main finding is an increasing unemployment level, since the sizeable decrease of the employment rate in the mass-production system, provided by the higher productivity of digital assets, is usually not counterbalanced by the new jobs created in the digital sector.
For some organizations, the rapid pace of economic growth, the digital revolution, and the globalization of business meant creating or acquiring intangible assets. These assets have grown in ...significance for determining a company's global value and for promoting economic prosperity, while also serving as a catalyst for the creation of added value. In this way, drawing on specialized literature, the article's aim is to pinpoint and compile the primary problems that occur when an economic entity's market value surpasses its accounting value, Additionally, we want to draw attention to the primary connections that exist between intangible assets, market value, and entity performance. In this respect, only those studies that focused on the valuation of intangible assets in relation to various concepts (competitive advantage, firm value, firm performance, innovative processes, corporate governance, etc.) have been selected, all these studies being undertaken at the level of listed or unlisted entities at national level. This study shows that important internally generated intangible assets (goodwill, intellectual capital, brand etc.) are not well understood, identified, managed, or consistently reported within an entity in Romanian annual financial reports.
Multinational enterprises (MNEs) in the information technology and business process outsourcing (IT/BPO) sector are at the forefront of technological disruption and change, which necessitates firms ...to remain agile and continuously innovate their business models. This paper investigates the investments made by IT/BPO MNEs in intangible assets and the role of encouraging management and leadership practices that supports the core tenets of strategic agility at a time when the global financial crisis (GFC) occurred. Using a two phase mixed methodology, that tests three key a priori themes, first, we examine to what extent the investments in intangible assets led to the development of strategic agility (SA), which in turn led to greater technological performance over the longitudinal period 2007–2017. Second, we further shed light on the positive relationship between intangible assets and strategic agility by identifying which Indian IT/BPO groups (based on location and firm age) show greater technological performance and, third, how such groups translate deliberate investments in intangible assets that lead to SA and greater technological performance, as compared to other groups over time. Overall, our findings provide evidence that IT/BPO MNEs' past sustained investments in intangible assets paved the way for the IT/BPO MNEs to respond in an agile manner when the GFC hit.
Research summary: We explore the effect of the interplay between a firm's external and internal actions on market value in the context of corporate social responsibility (CSR). Specifically, drawing ...from the neo-institutional theory, we distinguish between external and internal CSR actions and argue that they jointly contribute to the accumulation of intangible firm resources and are therefore associated with better market value. Importantly, though, we find that, on average, firms undertake more internal than external CSR actions, and we theorize that a wider gap between external and internal actions is negatively associated with market value. We confirm our hypotheses empirically, using the market-value equation and a sample comprising 1,492 firms in 33 countries from 2002 to 2008. Finally, we discuss implications for future research and practice. Managerial summary: Companies often accumulate intangible assets by taking internally and externally oriented CSR actions. Contrary to popular beliefs, the data show that they undertake more internal than external ones: firms do more and communicate less. How does a potential gap (i.e., a misalignment) between internal and external CSR actions affect a firm's market value? We find that although together (the sum of) internal and external actions are positively associated with market value, a wider gap has negative implications. In other words, firms do not realize the full benefits of their internal actions when such actions are not externally communicated to key stakeholders, and to the investment community in particular. This negative association with market value is particularly salient in CSR-intensive and the natural resources and extractives industries.
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