Do the financial statements of intangible-intensive companies hold less information content for investors?

Abstract

This study uses the event study method to compare the information content of annual accounting releases in sectors that differ in respect of the proportion of market value that may be attributed to intangibles. The results demonstrate that there are differences between industrial sectors in the share price reaction to accounting events and that this reaction appears to be much less significant in sectors where the investment in intangible assets is relatively high.

Notes

¹ Our industry selection also took account of the discourse in the existing literature as to the likely information content of accounting reports within specific industrial sectors.

² The number of companies within each sector is as follows: Oil and Gas, 43; Software, 151; Construction, 74; and Real Estate 85.