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Japan's Intangible Capital and Valuation of Corporations in a Neoclassical Framework

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  • Hiroki Arato
  • Katsunori Yamada

Abstract

Employing a new accounting data set, this paper estimates the value of productive capital stocks in Japan using the neoclassical model of McGrattan and Prescott (2005). We compare those estimates to actual corporate valuations, and show that the actual value of equity plus net debt falls within a reasonable range of the theory's prediction for the value of Japanese corporations during the periods 1981-86 and 1993-97. This finding differs from previous results based on studies of aggregate data sets or based on studies of micro data sets that neglected intangible capital. We also show that the Japanese ratio of the amount of intangible capital stock to the amount of tangible capital stock is comparable to the analogous ratios for the U.S. and U.K.

Suggested Citation

  • Hiroki Arato & Katsunori Yamada, 2010. "Japan's Intangible Capital and Valuation of Corporations in a Neoclassical Framework," ISER Discussion Paper 0772r, Institute of Social and Economic Research, The University of Osaka, revised Oct 2010.
    • Handle: RePEc:dpr:wpaper:0772r
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    File URL: https://www.iser.osaka-u.ac.jp/static/resources/docs/dp/2010/DP0772R.pdf
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