Acquisition Prices and the Measurement of Intangible Capital

Michael Ewens, Ryan H. Peters, Sean Wang

NBER Working Paper No. 25960
Issued in June 2019
NBER Program(s):Corporate Finance Program, Productivity, Innovation, and Entrepreneurship Program

We use 1,521 acquisition purchase price allocations to estimate intangible capital stocks. The estimated depreciation of knowledge capital (R&D) is 32%, some 28% of SG&A represents investment in organizational capital and parameter estimates exhibit significant industry variation. Aggregating these accounts, 75% of intangibles come from organizational capital, and total stocks are 10% smaller versus stocks using prior parameters. Adjusting for intangibles, average market-to-book falls from 1.74 to an average of one. Relative to existing approaches, our stocks improve the explanatory power of enterprise value, human capital and brand rankings, while exhibiting the expected correlations with patent valuations and investment rates.

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Document Object Identifier (DOI): 10.3386/w25960