Intangible Assets and the Permanence of Unexpected Earnings

• Author / Creator

  John, Sarin

• I study whether the greater scalability of intangible assets results in a positive relation between firms’ use of intangible assets and shareholders’ perception of the permanence of earnings innovations (the earnings response coefficient or ERC). After documenting that ERCs increase with the use of intangible assets, I examine cross-sectional variation in the relationship. All else constant, the positive link between the use of intangibles and perceived earnings permanence attenuates when firms’ ownership of the intangible assets is less certain. This attenuation is manifest when the firm is at risk of losing intangible capital embodied in its most valuable employees, particularly when faced with weak enforcement of non-compete agreements, or when the firm is at risk of losing control of codified intellectual capital, especially in jurisdictions known for subverting intellectual property rights. Takeover defenses reinforce the positive link between the use of intangible assets and perceived earnings permanence. This effect is consistent with the view that takeover defenses lower the cost of investments in firm-specific human capital.

• Subjects / Keywords

  • Intangible Assets
  • Earnings Response Coefficient

• Graduation date

  Spring 2021

• Type of Item

  Thesis

• Degree

  Doctor of Philosophy

• DOI

  https://doi.org/10.7939/r3-zrt8-3f15

• License

  This thesis is made available by the University of Alberta Libraries with permission of the copyright owner solely for non-commercial purposes. This thesis, or any portion thereof, may not otherwise be copied or reproduced without the written consent of the copyright owner, except to the extent permitted by Canadian copyright law.