The Value Relevance and Reliability of Intangible Assets: Evidence from South Korea

• Main Author: Hyunmi Ji
• Format: Article
• Language: English
• Published: People & Global Business Association (P&GBA) 2018-06-01
• Series: Global Business and Finance Review
• Subjects: intangible assets; reliability; value relevance; international financial reporting standards
• Online Access: http://www.gbfrjournal.org/pds/journal/thesis/20180710115602-NK8E2.pdf

This study empirically verifies how the value relevance of intangible asset accounting information is affected by the degree of information reliability of intangible assets. The study period was from 2011 to 2016 when Korea International Financial Reporting Standards (K-IFRS) were applied, and the sample companies were 8,174 firm-year observations. Empirical analysis shows that investors have relatively positive evaluations of intangible assets in the capital market when intangible assets are highly reliable. This implies that the reliability of intangible assets is significant information to help evaluate the relationship between accounting information and stock prices. The contribution of this study is as follows. First, it is confirmed that the usefulness of accounting information can be enhanced if the reliability of intangible assets is guaranteed. Second, reasonable decision-making can be induced in the use of intangible asset accounting information in accounting decision making, supervision, and investment decision-making. Third, it can be recognized by managers that the value of intangible assets that are highly reliable can be recognized in the capital market.