How do Intangible Assets Create Economic Value? An Application to Banks

38 Pages Posted: 11 Oct 2007

See all articles by Alfredo Martín‐Oliver

Alfredo Martín‐Oliver

University of the Balearic Islands

Vicente Salas-Fumás

University of Zaragoza - Department of Business Administration and Organization

Date Written: October 10, 2007

Abstract

This paper examines the determinants of economic value and investment behavior of Spanish banks under the theory of investment for a multi-asset firm, focusing on three key issues: i) the distinction between immaterial and intangible assets and how each of them is related to the economic value of the firm; ii) the test of whether the accumulation of intangibles is a consequence of incurring adjustment costs or, on the contrary, intangibles are accumulated at no cost; iii) how to account for market power in the valuation of the multi-assets firm. The empirical results quantify the contribution of material, immaterial (information technology and advertising) and intangible (organization capital) assets to economic value of Spanish banks, separated from the contribution of market power. We find that intangible assets build up from adjustment costs of investments in IT and rents from market power split evenly the economic value of the bank above the replacement cost of material and immaterial assets.

Keywords: Intangibles, IT capital, adjustment costs, valuation of banks, investment of banks

JEL Classification: G12, G21, D21, M41

Suggested Citation

Martin-Oliver, Alfredo and Salas-Fumás, Vicente, How do Intangible Assets Create Economic Value? An Application to Banks (October 10, 2007). Banco de España Research Paper No. WP-0730, Available at SSRN: https://ssrn.com/abstract=1020685 or http://dx.doi.org/10.2139/ssrn.1020685

Alfredo Martin-Oliver (Contact Author)

University of the Balearic Islands ( email )

Crtra. Valldemossa, km 7.5
Ed. Jovellanos
Palma de Mallorca, Illles Balears 07122
Spain

Vicente Salas-Fumás

University of Zaragoza - Department of Business Administration and Organization ( email )

Dr. Cerrada 1
5005 Zaragoza
Spain
+34 976 761803 (Phone)

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
795
Abstract Views
4,949
Rank
57,596
PlumX Metrics