Pricing the missing intangible capital: Evidence from the China A‐share market

Author:

Chen Jing1ORCID,Jiang Tianyuan2ORCID,Zhang Manling3ORCID,Li Huixuan4ORCID

Affiliation:

1. China Agricultural University Beijing China

2. Central University of Finance and Economics Beijing China

3. University of Science and Technology Liaoning Anshan China

4. Beijing Technology and Business University Beijing China

Abstract

AbstractThis study develops novel proxies for firm‐level intangible capital in China's A‐share market and assesses its pricing implications. We compile intangible capital from relevant expenditure entries detailed in the notes of financial statements and assess them using perpetual inventory methods, accounting for industry‐specific variations. Our findings reveal a significant positive intangible capital premium. Additionally, the intangible capital factor substantially improves the performance of the Fama–French three‐ and five‐factor models, and other widely accepted pricing models. This research contributes to the broader understanding of modern production paradigms that increasingly rely on intangible assets and investigates their valuation implications in financial markets.

Funder

National Social Science Fund of China

National Natural Science Foundation of China

Publisher

Wiley

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