Intangible assets, influence on the return on equity - evidence from S&P 100 Index

• Autor(a) principal: García y García, Jair Alejandro
• Data de Publicação: 2018
• Tipo de documento: Dissertação
• Idioma: eng
• Título da fonte: Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
• Texto Completo: http://hdl.handle.net/10198/18078
• topic: Intangible assets; Return on equity; Knowledge economy; Market value; Domínio/Área Científica::Ciências Sociais::Economia e Gestão

In the 21st century, the most valuable strategic resources for business enterprises will no longer be physical assets such as land and machines, as was the case at the beginning of the 20th century, but rather intangible assets (IA) such as knowledge, patents, and intellectual property rights. This shift responds to a transition towards a knowledge-based economy (Ipate & Pârvu, 2016; Park, 2015). Nowadays, as companies are acquiring and developing more non-physical assets, the question arises: what is the effect of IA in companies’ performance? Therefore, this study aims to analyze the effect of IA (exclusively those that are recognized and shown in the balance sheet) on the return on equity (ROE). In order to analyze the influence of IA on ROE, the study used components of the Standard and Poor 100 Index (S&P100). The S&P100 index comprises 101 companies across multiple industry groups; however, due to the research restrictions, only 68 companies were selected as the study’s sample. The Three-Step DuPont Model, comprising of three factors - net profit margin, asset turnover and equity multiplier - was used to analyze the effect of IA on ROE. For the research purposes, the Dupont model was modified to isolate IA. The analysis was done using book and market values for the dependent variable. The research results were obtained using the Ordinary Least Square (OLS) method. According to our findings, with ROE at book value the influence of IA on ROE is 34% excluding goodwill and 31% including goodwill. At market value, the influence of IA on ROE is almost 20%. Additionally, the results indicated a significant gap between the financial Information and the market assessment of shareholders equity.