An Empirical Study On The Value-Relevance Of Intangible Assets In China

In modern time, intangible assets are the important resources in firms and are playing an increasingly dominant role in wealth creation. The information about intangible assets is also cared by people.Are there any deficiencies existed in the accounting standard relevant to intangible assets? If say yes, then how to improve the standard? All of the questions need our researchers to answer through value relevant study about intangible assets.On the basis of early empirical study results of the value relevant about intangible assets both at home and abroad, we study the relationship between the reported value of intangible assets, the associated amortization expense, and the firm's equity market value from 2001 to 2003, using a matched pair portfolio analysis and multiple regression analysis. The results indicate that: the stock market of our country positively values reported intangible assets; the market's valuation of a unit of intangible assets is higher than its valuation of other reported assets; firm's equity market values are far from theirs book values in our country. Furthermore, we find: the differences between firm's equity market values and book values are larger in firms that don't reported intangible assets; the market does not negatively value amortization expense; the market values amortization expense differently from other expense reported in the income statement.The innovations of this paper lie in: (1) we use a matched pair portfolio analysis and multiple regression analysis, because there are methodological problems existed in regression analysis and a matched pair portfolio analysis can overcome them; (2) we provide empirical evidences on the relationship between amortization expense and firm's equity market values; (3) the first accounting standard relevant to intangible assets was issued in 2001, and we select the year of 2001 as the beginning year of our test period, so this study has implications for standard setting.