Study On The Effect Of Intangible Assets On Operating Profits In China’s Bio-pharmaceutical Companies

With the emerging of knowledge-economy era in1990s, enterprises attachmuch importance to intangible assets such as human resource, relation capital,information technology and R&D, in order to gain competitive advantage andimprove profitability. The amount and quality of intangible assets that a companyowns symbolize its technology capability and competence, and they play importantroles in firm’s survival and progress.Based on Aboody model, this paper tends to study short-term and long-termeffect of intangible assets on operating profits in a multi-variable regression method,and then to explore the effect weight of each type of intangible assets. The sampleof this study is from bio-pharmaceutical companies listed during year2007and2011in Shanghai and Shenzhen Stock Exchange.Empirical study result indicates that intangible assets have significantlypositive effect on short-term operating profit, while the effect on long-termoperating profit is not significant. As time goes on, the long-term effect first showspositive, and then turns to negative. Interestingly, the positive effect is gettingweaker, and negative is becoming stronger. On the effect weight of each type ofintangible, different types influence in a diverse way. The result shows tech-typehas significant positive relationships with operating profit, while use-typeinsignificant negative, and other-type significant positive relationships.This paper enriches the firm value related study of intangible assets in theory.It also has important practical guidelines on managing and investing intangibleassets, in order to gain high profitability.