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An empirical investigation of the relationship between intellectual capital and firms’ market value and financial performance

Ming‐Chin Chen (Department of Accounting, National Chengchi University, Taipei, Taiwan)
Shu‐Ju Cheng (Audit Services, Deloitte & Touche, Taipei, Taiwan)
Yuhchang Hwang (School of Accountancy, Arizona State University, Tempe, Arizona, USA)

Journal of Intellectual Capital

ISSN: 1469-1930

Article publication date: 1 June 2005




The purpose of this article is to investigate empirically the relation between the value creation efficiency and firms’ market valuation and financial performance.


Using data drawn from Taiwanese listed companies and Pulic's Value Added Intellectual Coefficient (VAIC™) as the efficiency measure of capital employed and intellectual capital, the authors construct regression models to examine the relationship between corporate value creation efficiency and firms’ market‐to‐book value ratios, and explore the relation between intellectual capital and firms’ current as well as future financial performance.


The results support the hypothesis that firms’ intellectual capital has a positive impact on market value and financial performance, and may be an indicator for future financial performance. In addition, the authors found investors may place different value on the three components of value creation efficiency (physical capital, human capital, and structural capital). Finally, evidence is presented that R&D expenditure may capture additional information on structural capital and has a positive effect on firm value and profitability.


The results extend the understanding of the role of intellectual capital in creating corporate value and building sustainable advantages for companies in emerging economies, where different technological advancements may bring different implications for valuation of intellectual capital.



Chen, M., Cheng, S. and Hwang, Y. (2005), "An empirical investigation of the relationship between intellectual capital and firms’ market value and financial performance", Journal of Intellectual Capital, Vol. 6 No. 2, pp. 159-176.



Emerald Group Publishing Limited

Copyright © 2005, Emerald Group Publishing Limited

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