Cover IMF Working Papers
Buy Book in Print
Financial Constraints, Intangible Assets, and Firm Dynamics: Theory and Evidence
Author:
Sophia Chen
Search for other papers by Sophia Chen in
Current site
Google Scholar Close
Series:
IMF Working Papers
Volume/Issue:
Volume 2014: Issue 088
Language:
English
Publication Date:
14 May 2014
DOI:
https://doi.org/10.5089/9781484393741.001
ISBN:
9781484393741
ISSN:
1018-5941
Pages:
38
Keywords:
WP; intangible assets; market value; Financial constraints; firm dynamics; Tobin’s q; asset tangibility; production parameter; selling; general; and administrative; entrant firm; share of intangible assets; Aging; Asset valuation; Stocks; Financial frictions
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
Download PDF (1.5 MB) Download Epub
I study whether firms' reliance on intangible assets is an important determinant of financing constraints. I construct new measures of firm-level physical and intangible assets using accounting information on U.S. public firms. I find that firms with a higher share of intangible assets in total assets start smaller, grow faster, and have higher Tobin’s q. Asset tangibility predicts firm dynamics and Tobin’s q up to 30 years but has diminishing predicative power. I develop a model of endogenous financial constraints in which firm size and value are limited by the enforceability of financial contracts. Asset tangibility matters because physical and intangible assets differ in their residual value when the contract is repudiated. This mechanism is qualitatively important to explain stylized facts of firm dynamics and Tobin’s q.
  • Collapse
  • Expand
Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund