Decomposing firm value

Frederico Belo, Vito D. Gala, Juliana Salomao, Maria Ana Vitorino

Research output: Contribution to journalArticlepeer-review

19 Scopus citations


What are the economic determinants of a firm's market value? We answer this question through the lens of a generalized neoclassical model of investment with quasi-fixed labor and three heterogeneous capital inputs. We estimate the structural model using firm-level data on US firms and find that, on average and depending on the industry, installed labor force accounts for 14–21% of firms’ market value, physical capital accounts for 30–40%, knowledge capital accounts for 20–43%, and brand capital accounts for 6–25%. Our analysis provides direct empirical evidence for the importance of labor and intangible capital inputs for understanding firm value.

Original languageEnglish (US)
Pages (from-to)619-639
Number of pages21
JournalJournal of Financial Economics
Issue number2
StatePublished - Feb 2022
Externally publishedYes

Bibliographical note

Funding Information:
This work was supported by Open Fund (PLN201615) of State Key Laboratory of Oil and Gas Reservoir Geology and Exploitation (Southwest Petroleum University), National Natural Science Foundation of China (No. 51502146, U1404506), Natural Science Foundation of Henan Department of Education (No. 14A150021), Scientific Research Starting Project of SWPU (No. 2015QHZ001), and Young Scholars Development Fund of SWPU (No. 201499010100).

Publisher Copyright:
© 2021


  • Intangibles
  • Neoclassical investment
  • Structural estimation
  • Valuation


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