Costs of intangibles and rents from market power in the valuation and investment of the multi-assets firm

In this paper we examine the determinants of economic value and investment behavior of the multi-asset firm when the firm internally produces intangible assets in the process of making fully productive the externally purchased ones and it has market power. The theoretical models are estimated with data from Spanish banks on material (branches, financial), immaterial (advertising and IT) and intangible (training of workers in the use of computers) assets and assuming market power in loans and/or deposits. We find that the replacement cost of intangibles and the rents from market power represent around 18% and 24%, respectively, of the economic value of the representative bank. The rest of the economic value corresponds to the replacement cost of market purchased material and immaterial assets.