Companies intangibles: Unique versus generic

International Review of Economics and Finance. 2017. Vol. 49. P. 266–275.

Parshakov P., Zavertiaeva M. A.

Purpose

In the era of the knowledge economy intangibles are recognized by investors as pivotal value drivers. This paper proposes an intangibles-based tool for picking companies with value growth potential.

Design/methodology/approach

We suggest a model to select companies that effectively use unique intangibles (in contrast to the generic intangibles). To test whether these results can be explained by skill we implement a bootstrap procedure. Companies that are able to use unique intangibles efficiently are combined in a portfolio.

Findings

Only 22% of companies have the skills to use unique intangibles, but all of them are characterized by the efficiency of their use. The created portfolio demonstrates a higher cumulative return, Sharpe ratio and lower drawdown than S&P500. We also find the increasing importance of intangibles for investors during the crisis.

Research limitations/implications

Both the created portfolio and the benchmark (S&P 500 index) are analyzed without transaction costs. Also the benchmark construction is based on equal-weighted sum of company M/B ratios.

Originality/value

We take into account the quality of intangibles (efficiency of unique intangibles use) while previous research of portfolio forming methods is based on quantity of intangibles.

Keywords: интеллектуальный капитал, управление знаниями, intellectual capital, knowledge management, нематериальные активы, внутренне созданные нематериальные активы, investment portfolio, intangibles

Publication based on the results of: Optimal strategies for intangibles (2017)