Influence of Intangible Capital on company's Market Value: evidence from IT industry

Abstract

The goal of this paper is to explore the drivers of IT companies’ Market Value in the context of Efficient-market Hypothesis. The author tests the influence of adjusted Book Value, R&D Asset, Organizational Development Asset, and Cyclically Adjusted P/E ratio on the Market Value of S&P500 IT companies over the 2005-2010 period with the help of regression analysis. The results of the analysis suggest that both R&D and Organizational Development Asset have a positive influence on Market Value for IT companies, but different factors are important for Hardware and Software companies. The results provide evidence that in H2 2009-2010 period Software industry recovered from crisis, while Hardware industry was still experiencing its aftereffects. A set of recommendations for managers of IT companies developed on the basis of these findings is presented in results.