Abstract:
In modern economics, Intellectual capital is described as an intangible asset which can be used as a source of sustainable competitive advantage. However, intellectual capital components have to interact with each other to create value. The paper aimed at examining the impact of intellectual capital on the market value and the financial performance of the firms. The efficiency of the value added by corporate intellectual ability (Value Added Intellectual Coefficient) was incorporated to measure the intellectual capital construct. The analyses were performed using data derived from the financial statements of 28 firms listed on the Tehran Stock Exchange (TSE) during a four-year period from 2006 to 2009. Correlation and Ordinary Least Square (OLS) regressions have been carried out on panel data to check the impact of intellectual capital on firms’ market value and financial performance. While the findings of the study failed to support most of the hypotheses it was shown that there was a statistically significant relationship between structure capital efficiency and financial performance (ROE, ROA). Despite the fact that intellectual capital has increasingly been recognized as an important strategic asset for sustainable corporate competitive advantages, the results of the present study raised new arguments and indicated the need for further research on the subject.
Machine summary:
While the findings of the study failed to support most of the hypotheses it was shown that there was a statistically significant relationship between structure capital efficiency and financial performance (ROE, ROA).
ABSTRACT: Keywords: Intellectual capital, Market value, Book value, Financial performance, Tehran Stock Exchange INTRODUCTION Intellectual Capital (IC) that can be briefly defined as the knowledge based equity of organizations has attracted a significant amount of practical interest during the last decade (Petty and Guthrie, 2000; Campisi and Costa, 2008).
The main objective of the present study is to examine the relationship between intellectual capital, market value and financial performance.
Moreover, based on the aforementioned VAIC methodology, the present study analytically examines the separate effects of capital employed efficiency, human capital efficiency, and structural capital efficiency on market value and financial performance.
Therefore, the observed gap between market and book value that has been highlighted in the bibliography (Lev and Zarowin, 1999; Lev, 2001; Chaminade and Roberts, 2003; Fincham and Roslender, 2003; Lev and Radhakrishnan, 2003; Andrikopoulos, 2005; Tseng and Goo, 2005; Zerenler and Gozlu, 2008) can be attributed to the intellectual capital assets that are not recognized in balance sheets (Brennan and Connell, 2000; Chaharbaghi and Cripps, 2006).
In South Africa, Firer and Williams (2003), investigated the relationship between intellectual capital and performance of 75 companies accepted in Johannesburg Stock Exchange through using the measures of profitability, productivity, and market value.