Article2015

The relationship between intellectual capital, firms’ market value and financial performance

374 citations0/0 files storedJournal of Intellectual Capital

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Intellectual Capital and Performance Analysis Accounting Theory and Financial Reporting Financial Reporting and Valuation Research

Abstract

Purpose – The purpose of this paper is to explore and compare the extent of intellectual capital (IC) and its four components among ASEAN countries, and examine the relationship between firms’ IC, market value, and financial performance. Design/methodology/approach – The study uses the data of 213 technology firms listed on five ASEAN stock exchanges. Pulic’s Value Added Intellectual Coefficient model is modified by adding an extra component, namely, relational capital efficiency (RCE). The Kruskal-Wallis one-way ANOVA and multiple regression analysis have been utilized to test the hypotheses. Findings – The results reveal that there is no significant difference in Modified Value Added Intellectual Coefficient (MVAIC) across five ASEAN countries; however, firms in each country tend to place a different degree of emphasis on components of MVAIC to generate corporate value. The results further indicate a positive relationship between IC and market value, confirming that firms with greater IC tend to have greater market value. Likewise, a positive relationship between IC and financial performance measures is confirmed. Specifically, IC is found to be positively associated with margin ratio and return on assets. Capital employed efficiency and human capital efficiency are found to be the most influential value drivers for both market value and financial performance while structural capital efficiency and relational capital efficiency possess less importance. Originality/value – This study contributes to the IC literature by expanding our knowledge of IC in the emerging economies, and providing a national comparative IC research when such research is limited.

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References

1997Intellectual Capital: Realizing Your Company's True Value by Finding Its Hidden Brainpower 1997The New Organizational Wealth: Managing and Measuring Knowledge-Based Assets 2001Assessing knowledge assets: a review of the models used to measure intellectual capital 2003Intellectual capital and traditional measures of corporate performance 2005An empirical investigation of the relationship between intellectual capital and firms’ market value and financial performance 1997Developing intellectual capital at Skandia 2007Intellectual capital and financial returns of companies 2012Reflections and projections: A decade of Intellectual Capital Accounting Research

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2019Intellectual capital and firm performance: an extended VAIC model 2018Intellectual Capital, Financial Performance and Companies’ Sustainable Growth: Evidence from the Korean Manufacturing Industry 2018The impact of intellectual capital on firm performance: a study of Indian firms listed in COSPI 2020Measures that matter: an empirical investigation of intellectual capital and financial performance of banking firms in Indonesia

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