THE IMPACT OF INTANGIBLE FACTORS ON PROFITABILITY: EVIDENCE FROM CORPORATIONS TRADED AT MUSCAT SECURITIES MARKET IN OMAN

Abstract

The objective of this paper is to determine whether corporate financial performance may be influenced from intangible assets owned by a company and some special incurring expenditures benefiting the intangible value of the company even though such items could also be technically expensed contrary to getting capitalized. Combining the intangibles reported on the corporate balance sheets with the expenditures such as RD meaning CVIF and CVIF/Total Assets (CVIFTA) respectively, the latter of which is a relative measure. Four (4) profitability measures, namely Gross Profit Margin (GPM), EBIT Margin (EBITM), Net Profit Margin (NPM) and Return on Assets (ROA) are developed as proxies to indicate for corporate financial performance. Considering all the resulting eight (8) models each, panel data regression analyses are performed separately to specifically document the linkage between corporate intangibles and corporate financial performance. Results provide a strong evidence by showing that intangibles do have a significant and a positive effect on corporate financial performance, except when ROA is regressed by CVIFTA rather than CVIF. This effect on and the linkage with financial performance is documented to be the most robust once GPM and NPM are to indicate the performance in the forms of CVIF and CVIFTA respectively.