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The Valuation of Organization Capital

The Valuation of Organization Capital

Chapter:
(p.73) 3 The Valuation of Organization Capital
Source:
Measuring Capital in the New Economy
Author(s):
Baruch LevSuresh Radhakrishnan
Publisher:
University of Chicago Press
DOI:10.7208/chicago/9780226116174.003.0004

This chapter describes a firm-specific measure of organization capital and applies it to produce estimate for a large sample of publicly traded companies. It explains that this measure involves the measure organizational capital as a residual, much like total factor productivity. This chapter also evaluates the validity of this measure within a widely used investment valuation model and shows that it can contribute significantly to the explanation of differences in market values of firms, beyond the traditional value indicators of assets in place and expected abnormal earnings.

Keywords:   organization capital, publicly traded capital, factor productivity, investment valuation model, market values, expected abnormal earnings

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