Abstract
AbstractWe investigate how market reactions to earnings news differ between U.S. firms with high and low intangible capital. We expect investors to have difficulty processing information on earnings news for firms with high intangible capital, leading to a larger reaction to earnings news. Measuring intangible capital as the accumulated sum of externally purchased and internally created intangible assets, we show that both immediate and delayed market reactions to earnings news are larger for high‐intangible firms. Multivariate regressions and four‐factor alphas support the results. This effect is more substantial for firms with limited investor attention and mainly driven by organization capital.
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