ESSAYS ON THE RISKS ASSOCIATED WITH INTANGIBLES AND HUMAN CAPITAL

Intangibles and human capital are increasingly becoming the most prominent resources for firms in their mission to ‘create value’. With assets and resources that are difficult to visualize, measure or report on, it is of great importance to management and investors that the risks are recognized and examined critically. The thesis addresses two main risks associated with intangibles and human capital – (i) information, and (ii) value. Additionally, intangibles and human capital regard not only the (a) firm level, but also the (b) macro-economic level. Thus, the risks need to be understood and discounted in each of these fields. The thesis aims to interpret the problem of these diverse subjects by delving into four mixed-method studies as below: • the study of the cost of capital impact modeled by the expected returns of the non- financial and narrative disclosures provided in the annual reports of intangibles- intensive firms from the pharmaceuticals industry (Ch. 3); • the understanding of the impact of regulatory changes (e.g. Reg. FD and SOX) on the information environment with reference to exogenous intermediaries such as News and Analysts, and researching for causality-based relationships (Ch. 4); • the re-visitation of the concept of organizational capital, a much sought after vari- able in the management science, which is here modeled to be a measure of an organization’s overall performance risks (Ch. 5); • the investigation of the difference between human capital and structural capital first using financial accounting data, and then comparing it against a combined non-tradable measure of intangible capital, which is an amalgamation of human and structural capital (Ch. 6). The overall outcome of this study shows that there is a need for more measures, both financial and non-financial, to better understand the complex concepts of intangibles and human capital and their implications in terms of value creation and risk. The lack of explicit variables must not necessarily come in the way of this endeavor. The solution to the problems of identifying measures and variables for intangibles and human capital to understand and manage the different risks associated to them, can be largely overcome by virtue of “liberal interpretations”, albeit preserving a great clarity, of financial and non-financial data already available in the public domain.