Organization Capital and Expected Returns in Service and Non-Service Firms: Evidence from Thailand

Organization capital provides firms with competitive advantage, but because of its intangible and movable nature, investors view firms with high organization capital as risker and demand additional risk premia. Similar to Eisfeldt and Papanikolaou (2013), we find that firms in the Stock Exchange of Thailand with highest organization capital earn abnormal returns of 0.75% per month relative to the four-factor asset pricing model. In addition, we also document that the organization capital risk premium is more relevant for service firms than non-service ones.