On the Casual Relationship of Corporate Governance and Firm Value: an Intellectual Capital Perspective across the Life Cycle of Firms

Abstract

There are different models to measure the effect of corporate government on firm value. These models depend on different dimensions of intellectual capital, the interrelations between them and the effects on firm performance. It is important to analyze several specificities in small and medium sized enterprises (SME) in emerging countries. To extend prior studies, this paper specifically explores the importance of the life cycle of firms on the link among corporate governance, intellectual capital and firm value in a simultaneous equations framework in the emerging Taiwan market. This paper adds to the literature on the determinants of intellectual capital performance in the emerging Taiwan market. In particular, it tests the theories that corporate governance has impact on firm value through the intermediating role of intellectual capital. Our empirical results suggest that the relationship between corporate governance and firm value mainly depends on the nature of proxies for intellectual capital in the emerging Taiwanese market. On the whole, the study might help the banking regulators in addressing the factors affecting intellectual capital performance to take actions towards developing their performance and in turn maximise their value creation.