Intellectual capital and value: testing new IC measures in Russia

Abstract

Purpose

The aim of this paper is to propose extended intellectual capital (IC) indicators. The study shows that the essence of IC in the context of value is residual income, its growth rate and growth rate of equity taken together. It allows creating IC measures (modified residual income and economic value added of equity) that contain these components. The study investigates the relationship between IC and market value for Russian public firms.

Design/methodology/approach

The authors propose modified residual income and modified economic value added of equity as IC metrics. This study tests a relationship between market value and IC to investigate suggested metrics. Static and dynamic panel data models are used. 25 companies from the MOEX Russia Index were included in the study. The study covers the period from 2014 to 2018.

Findings

The findings show a strong positive relationship between market value and IC. The results confirm that extended IC measures have a stronger connection to market value.

Practical implications

Firstly, these results benefit managers. They can use proposed extended IC measures as targets for the company when planning business strategy and generating business environment. Secondly, suggested IC measures can help shareholders and investors achieve their long-term goal – wealth maximization.

Originality/value

The value of this article is the development of IC theory and valuation. The proposed measures differ in the way that they consider the growth rates – the main determinants of value along with efficiency.

Citation

Ovechkin, D., Boldyreva, N. and Davydenko, V. (2021), "Intellectual capital and value: testing new IC measures in Russia", Journal of Economic Studies, Vol. 48 No. 6, pp. 1111-1127. https://doi.org/10.1108/JES-05-2020-0226