The Relation Between Patent Citations and Tobin's Q in the Semiconductor Industry

The Relation Between Patent Citations and Tobin's Q in the Semiconductor Industry The market value of a firm is largely determined by the expected returns to the firm's tangible and intangible assets. However, accounting data generally excludes intangible assets. Financial variables which are constructed in part from accounting data, such as Tobin's Q, are thus biased. If measures of intangible capital are successful in explaining variation in Q, then a case can be made for incorporating such measures into future research. In high technology industries, such as the semiconductor industry, valuing a firm's intangible assets requires the valuation of its technological capital. Past studies have relied heavily on simple patent counts and research and development expenditures to quantify the technological component of a firm's intangible assets. This paper examines the ability of measures of intangible capital to explain variation in Q and considers an additional data source, patent citations. We find that stock variables created from citation data contain relevant information about the market's valuation of intangible assets. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Quantitative Finance and Accounting Springer Journals

The Relation Between Patent Citations and Tobin's Q in the Semiconductor Industry

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Publisher
Kluwer Academic Publishers
Copyright
Copyright © 1997 by Kluwer Academic Publishers
Subject
Finance; Corporate Finance; Accounting/Auditing; Econometrics; Operation Research/Decision Theory
ISSN
0924-865X
eISSN
1573-7179
D.O.I.
10.1023/A:1008208425044
Publisher site
See Article on Publisher Site

Abstract

The market value of a firm is largely determined by the expected returns to the firm's tangible and intangible assets. However, accounting data generally excludes intangible assets. Financial variables which are constructed in part from accounting data, such as Tobin's Q, are thus biased. If measures of intangible capital are successful in explaining variation in Q, then a case can be made for incorporating such measures into future research. In high technology industries, such as the semiconductor industry, valuing a firm's intangible assets requires the valuation of its technological capital. Past studies have relied heavily on simple patent counts and research and development expenditures to quantify the technological component of a firm's intangible assets. This paper examines the ability of measures of intangible capital to explain variation in Q and considers an additional data source, patent citations. We find that stock variables created from citation data contain relevant information about the market's valuation of intangible assets.

Journal

Review of Quantitative Finance and AccountingSpringer Journals

Published: Sep 29, 2004

References

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