The relationship between intellectual capital information and firms’ market value: a study from an emerging economy

A.A Ousama,A.H Fatima,Mashael Thaar Al-Mutairi

doi:10.1108/mbe-01-2019-0002

Abstract

PurposeThe purpose of this paper is to investigate the relationship between the intellectual capital (IC) information reported in the annual reports and market value of the companies listed on the Qatar Stock Exchange.Design/methodology/approachThe study is based on a panel data collected from the annual reports and Bloomberg database for six years, specifically the periods 2010-2012 and 2016-2018. The total sample consists of 252 observations. The theoretical framework was developed in reference to the resource-based theory. The regression model is based on Ohlson’s model, which has been modified by including IC information.FindingsThe study found that there is a significant relationship between IC information and firm market value. This finding indicates that companies report their IC to help the stakeholders (e.g. shareholders, investors) to understand the real value of the company (which includes IC values).Practical implicationsThe shift to a knowledge-based economy (KBE) has made knowledge a driver for economic growth, and it has become more important than capital, land and labour. This shift makes IC and resources vital for companies to create wealth, value and gain competitive advantage. The State of Qatar plans to transform its economy to a KBE in its “Qatar Vision 2030”. The findings of the study show that the companies have started to depend more on IC to contribute to transforming Qatar’s economy to a KBE.Originality/valueThis study could be considered a pioneer study to examine the association of IC disclosure and firm value in Qatar. Furthermore, prior literature has mixed findings, which justifies further investigation of IC’s effect on market value, particularly in the emerging economy of Qatar.

Highlights

Knowledge has gained prominence and is replacing traditional resources of physical assets and natural resources as the main resource of companies (Drucker, 1992)
The implication of this finding is that the listed companies in Qatar generally are aware of the importance of intellectual capital (IC) in the creation of their firm values; they try to communicate this fact through the disclosure of IC information
This study examines the relationship between IC information disclosure and market value of the listed companies in Qatar Stock Exchange (QSE)

Summary

Introduction

Knowledge has gained prominence and is replacing traditional resources of physical assets and natural resources as the main resource of companies (Drucker, 1992). The main component of a knowledge economy is dependence on intellectual capabilities, captured in intellectual capital (IC), rather than on physical inputs or natural resources (Powell and Snellman, 2004). There is no single definition of IC in the literature, many studies tend to describe it from a value and wealth creation perspective (Stewart, 2000; Ousama and Fatima, 2012). IC consists of a set of non-financial (e.g. human capital, knowledge) and non-physical (e.g. intellectual property, experience) resources that are able to create value and generate wealth (Garcıa-Meca and Martınez, 2005; Viedma Marti, 2007); the intangible resources are Received 2 January 2019 Revised 18 June 2019 Accepted 21 August 2019. The full terms of this licence may be seen at http:// creativecommons.org/licences/ by/4.0/legalcode

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