A study of relations between intellectual capital components, market value and finance performance

Abstract

In the intellectual capital (IC) literature, only a few studies have analyzed the relationship among the components of IC and organizational success. The purpose of this study is to examine the contact of IC’s components on firms' market value and financial performance. The value added intellectual coefficient (VAIC) approach developed by Pulic is used to verify the effect of IC’s components on firms' market value and financial performance in Iranian companies. Data were collected from 80 Iran companies listed in the Tehran Stock Exchange (TSE), from five different economic sectors for five-year period of 2006 to 2010; different regression models were constructed to examine the relationships between IC’s components and the selected market value and financial performance measures of these companies. SPSS software is also used for analyzing. The results of the analysis revealed no conclusive evidence to support a definitive association between IC, as measured by VAIC, and fail most of the hypotheses, and there is just a statistically significant relationship between human capital efficiency and financial performance and M/B. The paper covers the procedure of measuring IC, determination of its effect on company results and creating IC for competitive advantage. The companies chosen for the study are from four industries in Iran. Thus, the results may not be applicable to other industries in different countries. Recognizing the most influential elements of IC on organizational performance would help organizations to understand better the organizational capabilities they possess. In the Iran business context, the development of human resources seems to be one of the most significant factors of companies’ success. The paper explores value added of components of IC and these relationships with economic success of Iranian listed companies. Key words: Market value, financial performance, intellectual capital, Iran stock exchange.