Intangible investments and cost of equity capital: An empirical research on Vietnamese firms

Together with the development of knowledge-based economy, investment in intangibles has been dramatically increasing. Although intangibles are widely recognized as primary value drivers for more firms, as evidence of many studies related to the value relevance or the market valuation of intangible investments, little is known in the literature about the cost of equity capital for financing intangible investments, especially in Vietnamese literature extent. This paper's aim is therefore to empirically investigate the association between a firm's cost of equity capital and intangible investments detailed by research and development investment, business combination investment and organizational capital investment. We investigate the above relationship through the sample of 120 Vietnamese-listed firms from 2013-2017. Regression result confirmed that both higher level of research and development investment and larger amount of accounting goodwill raise the firm's overall cost of equity capital since their characteristics of these investments are riskier and less liquid and has a higher level of information asymmetry. Our findings could suggest several implications for managers and shareholders in making their investment decisions. Once again, this study adds to the existing business valuation literature by providing additional evidence of the impact of research and development investment as well goodwill on accounting for equity capital valuation.