IMF Working Papers

The Tax-adjusted Q Model with Intangible Assets: Theory and Evidence from Temporary Investment Tax Incentives

By Sophia Chen, Estelle Dauchy

June 12, 2014

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Sophia Chen, and Estelle Dauchy. The Tax-adjusted Q Model with Intangible Assets: Theory and Evidence from Temporary Investment Tax Incentives, (USA: International Monetary Fund, 2014) accessed November 21, 2024
Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

We propose a tax-adjusted q model with physical and intangible assets and estimate it with a self-collected comprehensive database of intangible assets. The presence of intangibles changes the accounting and economic measures of q. We show that when tax changes are temporary, the q model can be estimated by adjusting for the firm’s intangible stock and intangible intensity. We estimate our model using temporary investment tax incentive policies in the United States in the early 2000s. When the q-model accounts for intangible assets, the estimated investment elasticity to tax incentives is generally larger than otherwise. It is also larger for intangible-intensive firms, and increases with firm size.

Subject: Asset and liability management, Asset valuation, Depreciation, Financial institutions, Investment incentives, National accounts, Stocks, Tax incentives, Taxes

Keywords: Asset valuation, Bonus depreciation, Book value, Cash flow, Depreciation, Firm face, Firm level, Intangible assets, Intangible intensity, Intangible-intensive firm, Investment incentives, Investment rate, Investment tax incentives, Market value, North America, Q model of investment, Stocks, Tax incentives, WP

Publication Details

  • Pages:

    53

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2014/104

  • Stock No:

    WPIEA2014104

  • ISBN:

    9781498335478

  • ISSN:

    1018-5941

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