Organizational Capital, Brand Capital, and Information Asymmetry

Abstract

We develop a refined SG&A-based proxy for Organizational Capital (OC*) by explicitly separating Brand Capital (BC) from OC. We show that OC* and BC represent distinct constructs, with OC* reflecting firm-specific internal capabilities embedded in corporate systems and BC capturing external-facing brand and customer relationships. Validating our measure, we document that OC* is positively associated with goodwill in M&A transactions, while BC correlates with identifiable customer-related intangibles. Further, OC* aligns with management system quality in ESG scores, whereas BC relates to consumer-related ESG metrics, reinforcing their conceptual distinction. Lastly, we examine the relationship between OC* and information asymmetry. We find that OC*—unlike BC—is positively associated with insider trading profits and informed trading, suggesting implications for information asymmetry between capital market participants. Despite the increase in information asymmetry, we find no evidence of increased disclosure.