Analysis of the effects of intangible assets on corporate financial value

Abstract

Intellectual capital is knowledge that can be converted to value and researchers consider it to consist of the following components: human capital, structural capital, customer capital, and social capital. These components of intellectual capital are typically found in the minds of employees and within organisational structures and processes. In order to give intellectual capital a high level of attention and effectively manage an environment that helps to facilitate intellectual capital transfer, management must understand how it is transferred throughout the organisation. This study tries to illustrates relationship between intellectual capital (IC) of firms listed on the Iran Stock Exchange and their market value and profitability. The research uses value added intellectual coefficient (VAIC), to measure the IC of companies. The data sample is collected from 82 companies listed on the Tehran Stock Exchange between the years 2005 and 2012. The research investigates three hypotheses and used multiple regressions for the data analysis. The findings showed that IC and company performance are positively related and IC is correlated to future company performance. Modified VAIC model indicates efficiency in creating corporate value and the extent of corporate intellectual abilities. In the light of the high degree with M/B ratio, ROA and ROE, the results demonstrate that increase the firms’ intellectual capital will positively influence firms’ market value and profitability.