Intellectual capital: Effects on firm’ Market value, financial performance and financial vulnerability
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Date
2017
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Publisher
University of Management and Technology Lahore
Abstract
The existing research intends to evaluate the link between intellectual capital, firm’s market value, financial vulnerability and financial performance in specific market industries and particular constraints of Pakistan. Companies are selected from the listed corporations of PSX. The intellectual capital is measured using the VAIC methodology proposed by Pulic (2000a, b) that is based on three indicators of Intellectual Capital; Capital employed efficiency (VACE), Structural capital efficiency (STVA) and Human capital efficiency (VAHU). Market value is measured by market-to-book value of corporations. Profitability of corporations is measured by ROA and ROE, while financial vulnerability is measured by equity ratio and operating margin ratio. The outcomes of the study indicate mixed results. Intellectual Capital(IC) is linked with market value but it excludes the factors of human and structural capital efficiency. Moreover, ROE and ROA are significantly associated with IC. Finally, all three indicators of IC are significantly linked with ROE and ROA, excluding STVA in case of ROA. Financial vulnerability measures of Pakistan’s entities shows varied results with VAIC components. Hence, further research should consider advance accounting measures as well as mature financial structures to develop an ideal methodology for measuring Intellectual Capital and to establish it link with financial vulnerability.
Description
Supervised by: Dr. Safia Nosheen
Keywords
Pakistan, Intellectual Capital, VAIC, Profitability, Financial Vulnerability., MS THESIS