The role of assets components in firm valuation

Abstract

This study investigates the impact of the asset components on firm value in listed Korean stock markets during the period of 2000-2015. This paper extends conventional studies on a firm valuation by including asset components in an Ohlson (1995) model. Analytical results show that all asset components have a significantly positive impact on firm value. However, performance variables are negatively associated with business value. The results of this study show that the asset component on the balance sheet has a more positive effect on the increase in corporate value than the profitability and performance variables on the income statement and the cash flow statement. The empirical evidence of this study suggests that asset components should be regarded as major corporate value related variables in the Korean stock market. This study also suggests that intangible assets are the most important factors that should be considered in firm value.