Franchise Value, Intangibles, and Tobin's Q / Wan-Chien Chiu, Ravi Jagannathan, Kevin Tseng.

Format:

Book

Author/Creator:

Chiu, Wan-Chien.

Contributor:

Jagannathan, Ravi.

Tseng, Kevin.

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w30829.

NBER working paper series no. w30829

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2023.

Summary:

We decompose the difference between a firm's market and book values into two components: intangible assets that can be created by competing firms through SG&A/R&D expenditures, and the residual denoted as franchise value (FV). The estimated parameters in the model for creating intangible assets by capitalizing R&D/SG&A expenditures vary significantly across industries. Consistent with FV being a measure of economic rents and quasi-rents, ceteris paribus, higher FV firms face fewer product market threats, have higher markups, and their investments are less sensitive to their total Tobin's Q. In contrast, firms with higher capitalized intangible assets, face higher product market threats.

Notes:

January 2023.

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