Does the stock market evaluate intangible assets? An empirical analysis using data of listed firms in Japan

Abstract

Following Corrado et al. (Review of Income and Wealth 55:658–660, 2009), we measure intangible assets at the listed firm level in Japan. Compared to the conventional Tobin’s Q, the revised Q including intangibles is almost 1 on average, as suggested by Hall (Brookings Papers on Economic Activity 1:73–118, 2000 and American Economic Review 91:1185–1202, 2001). The standard deviation of the revised Q is smaller than that of the conventional Q. Estimation results based on Bond and Cummins (Brookings Papers on Economic Activity 1:61–124, 2000) show that greater intangible assets increase firm value. In particular, in the IT industries, on average Tobin’s Q is higher than that in the non-IT industries, and the stock market reflects the value of intangibles in the IT industries. These results suggest that the government should adopt policies that promote investment, including intangibles in the IT industries, and change in industry structure in Japan.