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AALTO UNIVERSITY SCHOOL OF ECONOMICS ABSTRACT Master’s Thesis March 15, 2011 Jani Koskela

INTANGIBLE ASSETS AND TIME TO PROFITABILITY OF NEWLY LISTED HIGH-TECH COMPANIES

PURPOSE OF THE STUDY The purpose of the study is to provide empirical evidence on how the intangible assets explain the attainment of post-issue operating profitability among newly listed and unprofitable High-Tech companies. The main classes of intangible assets of interest are the balance sheet reported intangibles and the income statement Research & Development expenditures.

DATA AND RESEARCH METHODS All data is downloaded from Thomson Financial’s Thomson ONE banker databases. The sample is global and covers the periods from 1995 to 2008. The presence effect analysis comprises 2 400 companies and the quantity effect analysis comprises 717 companies. The main estimation method is the Cox Proportional Hazards regression analysis. Logistic regression analysis is used to confirm the results.

RESULTS The results indicate that the intangible assets impact the attainment of post-issue operating profitability among newly listed and unprofitable High-Tech companies but their presence and quantity effects differ. Companies that reported balance sheet intangibles are likely to attain profitability faster than companies that did not. However the quantity of the reported intangibles seems to be uncorrelated with the likelihood of the attainment of profitability. The quantity of the Research & Development expenditures has a harmful effect on the likelihood of the attainment of profitability but the presence effect seems to have a zero impact.

KEYWORDS Intangible assets, operating profitability, Research & Development expenditures, balance sheet intangible assets