Impact of Intangible Assets on Profitability of Hong Kong Listed Information Technology Companies

Abstract

The objective of our study is to find out the relationship between intangible assets and financial performance of the listed technology firms in Hong Kong exchange market. Through reviewing the listed firms’ annual reports for a five year period (from 2008 to 2012), we have collected data of three kinds of intangible assets, which are research and development cost, employee benefit expense, and sales training. Meanwhile, we have used total assets and net profit as control variables in analyzing the relationship between intangible assets and financial performance, represented by return on assets (ROA) of firms. Using lagged R&D expenditure as instrumental variable; our results suggested that research and development investment and sales training are beneficial to firms’ financial performance while employee benefit expense is not.