Value relevance of financial information considering industry life cycle-evidence from Korean internet related industry

Abstract

With transition to Knowledge society, many companies in Internet related industries have had higher stock price than their accounting book value. Researchers pointed out its intangible assets as the reason of it. In addition, previous studies show that the effects of this nonfinancial information may be different according to industry life cycle. To check the effects of nonfinancial information about intangible assets and related expenditure on firm market value, we compare the relationships between financial information and firm valuation in Korean Capital market especially for Software, Digital content, and Internet related companies. We classify industry life cycle based on Tobin's Q value and compare the effects of intangible assets and expenditure for each period. The result shows the effects of intangible asset on firm market value are different according to industry life cycle.