Essays on managing intangible investments: Innovation and human capital

This dissertation examines issues related to managing corporate investments in intangibles, namely innovation and human capital. I examine how value-relevant information and a firm's compensation disclosure policy influence the effects of intangible investments on firm value.;In Essay 1, I examine the dual role of a firm's R&D investments. I demonstrate that a firm's investments in R&D not only contribute to its innovation per se, but also its ability to effectively absorb useful innovative activities of peer firms, namely technology spillovers. High R&D investments therefore likely create extra value for a firm going forward when it is exposed to large spillovers. However, I find that the stock market does not fully recognize the value of R&D investments and thus cannot incorporate this value-relevant information into stock prices immediately, leading to the undervaluation of firms with high R&D investments and high spillover exposure.;In Essay 2, I examine a firm's incentives to voluntarily disclose information regarding employee compensation. I demonstrate that properly managing employee morale is one of the important factors in deciding a firm's compensation disclosure policy since these policies either enhance or reduce employee morale by allowing workers to update their beliefs regarding relative abilities within the firm. Specifically, I show that a firm's optimal policy is to disclose employee compensation when the gains in greater effort from morale-enhanced employees outweigh the costs associated with withdrawn effort from morale-reduced employees.