2024 European Summer Meeting, Rotterdam: August, 2024
Intangible Capital Around the World
Frederico Belo
We estimate the value of intangible capital across 77 countries through the valuation approach of a neoclassical model of investment with two heterogeneous types of capital inputs: physical capital and intangible capital. Using data on public listed firms across the world, we infer the importance of intangible capital for the firm's market value in each country. Our results show that intangible capital is crucial for the model's success in capturing the variation in firm's market value across all economies. We find that intangible capital on average accounts for over half of the market value of firms in all countries, with significant cross country heterogeneity. Furthermore, firms with a larger share of their value driven by intangible capital have higher expected equity returns than firms with a lower share. The relative return of intangible capital to physical capital across the globe helps describe the common risk for investors across countries.
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