Research on the disclosure of intangible information to help the improvement of the evaluation criteria of businesses loans by financial institutions

Abstract

Corporate growth can be achieved through innovation, which involves maximising a company's 'intangible' elements, such as the skills and knowledge of employees. The 'business appraisal' lending model, which is a new financial business model based on mid- to long-term growth, is based around these intangible elements and, as such, helps companies to promote and nurture innovation. Professor Chitoshi Koga, School of Business Management, Tokaigakuen University, Japan, is working with Dr Xin Fu, Kyoto University of Advanced Science, Japan, and Dr Jun Yao, Meiji University, Japan, to investigate how intangible information can be useful in making economic decisions, with a particular focus on loans decisions for small-and-medium-sized enterprises (SMEs) and ventures. The team is developing a business appraisal model called the 'Koga/Sakakibara/Takahashi (KST)' model that is based on the 2009 Earnings Capability Index of Wulf, Pfiefer and Kivikas from Germany but has been transformed to make it relevant to SMEs in Japan. Using the model, a company's growth potential can be assessed, and it will prove particularly useful for Japanese SMEs as their evaluation relies on looking at intangible assets. Ultimately, Koga and the team hope the model will assist with financing and borrowing and, on a larger scale, reap regional economic benefits.