Contingencies of intellectual capitals and financial capital on value creation: Moderation of business cycles

Abstract

Purpose

The purpose of this paper is to investigate the relationship among intellectual capital (IC), financial capital (FC), firm value (V), and value creation (VC) in different business cycles (BC) for the conduct of strategic management that will maintain stable values and further increase V.

Design/methodology/approach

This research cites ICs as “other information” to combine ICs and the Ohlson model. Information provided by various capitals is validated by multiple regression analysis. Multi-group analysis is performed to test whether the coefficient is moderated by BC.

Findings

Results indicate the significant information of ICs and FC, and the contingency perspective of BC. The value relevance of ICs is moderated by BC. Prosperity has more explanatory capacities, and recession ICs yield more incremental information.

Research limitations/implications

VC is influenced by both ICs and FC. Besides, the macroeconomic situation should also be considered in strategic management and VC management.

Practical implications

In addition to ICs and FC, the macroeconomic situation must be taken into account when conducting strategic management, valuation management, investment decision, or industrial policy.

Social implications

Results indicate a contingency of BC, which can be a reference for enterprises to create higher V, for investors to make appropriate investment, as well as for governments to formulate sound industrial policies.

Originality/value

This paper applies BC to explore the value relevance of ICs and FC, leverages two models to represent V and VC, and cites complete four aspects of IC as “other information” to combine ICs and Ohlson model.

Citation

Tseng, K.-A., Lin, C.-I. and Yen, S.-W. (2015), "Contingencies of intellectual capitals and financial capital on value creation: Moderation of business cycles", Journal of Intellectual Capital, Vol. 16 No. 1, pp. 156-173. https://doi.org/10.1108/JIC-04-2014-0042