Get 20M+ Full-Text Papers For Less Than $1.50/day. Start a 14-Day Trial for You or Your Team.

Learn More →

An empirical investigation of the relationship between intellectual capital and firms’ market value and financial performance

An empirical investigation of the relationship between intellectual capital and firms’ market... Purpose – The purpose of this article is to investigate empirically the relation between the value creation efficiency and firms’ market valuation and financial performance. Design/methodology/approach – Using data drawn from Taiwanese listed companies and Pulic's Value Added Intellectual Coefficient (VAIC™) as the efficiency measure of capital employed and intellectual capital, the authors construct regression models to examine the relationship between corporate value creation efficiency and firms’ market‐to‐book value ratios, and explore the relation between intellectual capital and firms’ current as well as future financial performance. Findings – The results support the hypothesis that firms’ intellectual capital has a positive impact on market value and financial performance, and may be an indicator for future financial performance. In addition, the authors found investors may place different value on the three components of value creation efficiency (physical capital, human capital, and structural capital). Finally, evidence is presented that R&D expenditure may capture additional information on structural capital and has a positive effect on firm value and profitability. Originality/value – The results extend the understanding of the role of intellectual capital in creating corporate value and building sustainable advantages for companies in emerging economies, where different technological advancements may bring different implications for valuation of intellectual capital. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Intellectual Capital Emerald Publishing

An empirical investigation of the relationship between intellectual capital and firms’ market value and financial performance

Loading next page...
 
/lp/emerald-publishing/an-empirical-investigation-of-the-relationship-between-intellectual-QLrWzSWZG0
Publisher
Emerald Publishing
Copyright
Copyright © 2005 Emerald Group Publishing Limited. All rights reserved.
ISSN
1469-1930
DOI
10.1108/14691930510592771
Publisher site
See Article on Publisher Site

Abstract

Purpose – The purpose of this article is to investigate empirically the relation between the value creation efficiency and firms’ market valuation and financial performance. Design/methodology/approach – Using data drawn from Taiwanese listed companies and Pulic's Value Added Intellectual Coefficient (VAIC™) as the efficiency measure of capital employed and intellectual capital, the authors construct regression models to examine the relationship between corporate value creation efficiency and firms’ market‐to‐book value ratios, and explore the relation between intellectual capital and firms’ current as well as future financial performance. Findings – The results support the hypothesis that firms’ intellectual capital has a positive impact on market value and financial performance, and may be an indicator for future financial performance. In addition, the authors found investors may place different value on the three components of value creation efficiency (physical capital, human capital, and structural capital). Finally, evidence is presented that R&D expenditure may capture additional information on structural capital and has a positive effect on firm value and profitability. Originality/value – The results extend the understanding of the role of intellectual capital in creating corporate value and building sustainable advantages for companies in emerging economies, where different technological advancements may bring different implications for valuation of intellectual capital.

Journal

Journal of Intellectual CapitalEmerald Publishing

Published: Jun 1, 2005

Keywords: Intellectual capital; Financial performance; Value added; Taiwan

References