Intangible investments and cost of equity capital: An empirical research on Vietnamese firms

Figures & data

Table 1. Summary of the correlations discovered in the prior studies

	Regression variable: RE
	Affirmed sign	Proposed by	Expected sign	Explain the correlations with the dependent variable
RDC	+	Hall et al. (1984); Lach and Schankerman (1989); Barth and Kasznik (1999)	+	R&D investment raises the firm’s overall cost of equity capital since it is riskier and less liquid, and has a higher level of information asymmetry (Barth & Kasznik, 1999).
GW	+	Shirabe (2015); Shangguan (2005)	+	The shareholders could view accounting goodwill as another risk factor (Shirabe, 2015).
ORG	+/—	Shangguan (2005)	?	Organizational capital investment possessing the characteristics of riskiness, information asymmetry and illiquidity raises a premium on investors’ rate of return due to these disadvantages (Shangguan, 2005).
ROA	–	Barth et al. (1999)	–	The high and stable return on assets limits the cost of equity capital because investors require a lower rate of return for a less risky and effective business (Barth et al., 1999).
PB	–	Fama and French (1992); Norman (2017)	–	The fall in PB ratio leads to a rise in cost of equity capital as concerns about the health of a firm intensified (Norman, 2017).
SIZE	–	Alberts and Archer (1973)	–	The shareholders require higher cost of equity capital due to their anxiety about higher risk of insolvency or bankruptcy in small size companies (Alberts & Archer, 1973).
LEV	+	Pettengill and Lander (2015)	+	The equity investors expect a higher cost of equity capital because the higher level of financial leverage, the more risk they bear (Zeitun & Tian, 2007).
BETA	+	Sharpe (1964); Treynor (1965); Lintner (1965)	+	Beta is the expected relationship between returns on a share and returns on the market in the conventional capital asset pricing model (Sharpe, 1964).

Source: The authors’ statistics

Table 2. Summary of the contribution rate of selling, general administration spending by industry

Order	Industry	Number of companies	Number of observations	γ3	γ4	γ5
1	Commercials	14	70	1.873	−1.744	0.222
2	Information technology	5	25	19.258	−15.509	−4.577
3	Professional services and scientific instrument	9	45	2.545	−2.490	−0.746
4	Energy and mining	7	35	3.879	−0.081	3.043
5	Industrial manufacturing	26	130	−23.510	24.016	1.672
6	Agriculture	5	25	−9.346	0.068	8.487
7	Finance and insurance	3	15	−0.331	0.474	0.039
8	Transportation and logistics	8	40	−5.165	4.334	−1.382
9	Construction and Real estate	43	215	0.038	−0.033	0.143

Source: The authors’ regression by Eviews 9.0

Table 3. Descriptive statistics, correlation coefficients and multicollinearity problem

	RE	RDC	GW	ORG	ROA	PB	SIZE	LEV	BETA
RE	1
RDC	0.003**	1
GW	−0.001**	−0.060	1
ORG	−0.050	−0.169***	−0.0315	1
ROA	0.005*	0.123**	−0.071*	0.005	1
PB	−0.141***	0.199***	−0.044	0.117**	0.371***	1
SIZE	−0.196***	0.627***	−0.018	0.082**	0.266***	0.292***	1
LEV	0.122**	0.141***	−0.135***	−0.076*	−0.433***	−0.093**	−0.185***	1
BETA	−0.109**	0.151***	−0.055	0.055	−0.140***	−0.196***	0.147***	0.043	1
Mean	0.196	4.743	0.016	0.082	0.047	1.114	5.376	0.532	0.919
Median	0.188	4.738	0.003	0.014	0.035	0.720	5.303	0.577	0.915
Maximum	0.356	7.273	0.370	3.100	0.335	9.380	8.073	0.852	5.050
Minimum	0.081	0.602	−0.000	−1.418	−0.289	0.000	2.511	0.007	−1.634
Std. Dev.	0.066	0.973	0.033	0.396	0.068	1.282	0.809	0.224	0.651
Skewness	0.303	−0.198	4.910	2.497	−0.066	3.077	0.431	−0.163	0.365
Kurtosis	2.016	3.715	37.733	17.517	6.838	15.001	3.807	2.557	7.324
VIF	1.12	1.09	1.05	1.12	1.50	1.35	1.23	1.46	1.15
Note: Significant at: *10, **5 and ***1 percent levels

Source: Calculated by the authors in Eviews 9.0

Table 4. Association between the cost of equity capital and types of intangible investments

Variables	Pooled OLS		Fixed effects				Random effects
	Cross-section	Period	Cross-section	Period	Cross section	Period	Cross section	Period
	None	None	Fixed	None	Fixed	Fixed	Random	None
RDC	0.002***		0.016**		0.011		0.014***
GW	−0.001		0.026**		0.141		0.049
ORG	−0.125		−0.002		−0.001		−0.001
ROA	0.069		−0.024		−0.036		0.007
PB	−0.010***		−0.019**		−0.015		−0.012***
SIZE	−0.036***		−0.064***		−0.075***		−0.035***
LEV	0.019		0.056**		−0.069*		0.007
BETA	−0.007		−0.005		−0.007		−0.005
CONSTANT	0.028***		0.498***		0.578***		0.303***
Adjusted R^2	22.18		61.87		29.06		8.43
Durbin Watson	1.400		2.130		1.897		1.487
Likelihood test			6.062***		2.351***
Hausman test							22.510**
Note: Significant at: *10, **5 and ***1 percent levels

Source: Calculated by the authors in Eviews 9.0

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