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Article
Publication date: 29 December 2021

Reena Bhattu-Babajee and Boopen Seetanah

The purpose of this paper is to empirically assess the impact of value-added intellectual capital (VAIC) on the financial performance (FP) of companies in Mauritius.

Abstract

Purpose

The purpose of this paper is to empirically assess the impact of value-added intellectual capital (VAIC) on the financial performance (FP) of companies in Mauritius.

Design/methodology/approach

The research uses a dynamic panel vector error correction model (PVECM) which simultaneously allows for endogeneity and causality issues among the variables used.

Findings

The results show that VAIC enhances corporate FP, with a reported lower effect in the short run as compared to the long run. Other important determinants of firm’s performance are asset turnover, capital turnover and firm’s size. Leverage, on the other hand, is observed to be performance reducing in nature. FP of the companies is also a significant determinant of VAIC, implying reverse causal effects exist between the two variables of interest, namely, VAIC and FP.

Research limitations/implications

The study can be enhanced by doing an industry-specific comparison of the impact of VAIC on FP for more insights.

Practical implications

It is recommended that managers pay more attention to the role of firms’ stock of tangible and intangible assets, as this has a positive impact on firms’ FP. Also, the results may help to increase awareness of the importance of effective intellectual capital (IC) management within an organization. More so, as demonstrated by Ståhle et al. (2011), VAIC indicates the efficiency of the company’s labor and capital investments within firms in Mauritius. This study may, therefore, enable Mauritian firms to measure their IC efficiency and develop policies to promote and improve upon their intellectual potential to enhance firm’s performance.

Originality/value

The main theoretical contribution of this paper relates to the assessment and conceptualization of the bi-directional relationship between VAIC and FP. It confirmed that there are self-reinforcing feedback effects between VAIC and FP. Methodologically speaking, this paper investigates the VAIC–FP nexus in a dynamic setting using a dynamic panel data framework, namely, a PVECM which also allows for additional insights into the short- and long-run effects.

Details

Journal of Accounting in Emerging Economies, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 2042-1168

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Article
Publication date: 21 June 2020

Noorlailie Soewarno and Bambang Tjahjadi

This study aims to investigate the intellectual capital–financial performance relationship using two models, namely the conventional Value-Added Intellectual Coefficient …

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1284

Abstract

Purpose

This study aims to investigate the intellectual capital–financial performance relationship using two models, namely the conventional Value-Added Intellectual Coefficient (VAIC) model and the adjusted Value-Added Intellectual Coefficient (A-VAIC) model.

Design/methodology/approach

This study is designed as a quantitative research focusing on the relationship between intellectual capital and financial performance of the banking industry in Indonesia. As many as 114 data are derived from the publicly listed banks on the Indonesia Stock Exchange for the period of 2012–2017. The multiple regression analysis is employed to test the hypotheses studied.

Findings

In general, the result confirms that intellectual capital affects financial performance. Although not all hypotheses of the study are supported by either the VAIC model or the A-VAIC model, the results provide a deeper and new insight on how each component of intellectual capital efficiency (human capital, structural capital, capital employed, innovation capital) relates to financial performance (return on asset, return on equity, asset turnover, price to book ratio). The results also justify that further improvements in measuring intellectual capital are still needed in the future.

Research limitations/implications

This study limits its generalization since the sample is only in the Indonesian banking industry. Notwithstanding the limitation, the results imply that the Indonesian banking managers need to be aware of intellectual capital management because of its strategic role in enhancing financial performance.

Practical implications

This study contributes to the intellectual capital literature by providing empirical evidence on the use of both models, namely the conventional VAIC and the A-VAIC in the Indonesian banking industry research setting which is never been studied before.

Social implications

This study has the social implication to the enhancement of the quality life of the society. The higher the quality of intellectual capital in the banking firms, the better the banks serve the needs of the community.

Originality/value

This study contributes to the IC literature by providing empirical research on the use of the VAIC model and the A-VAIC model in the Indonesian banking industry.

Details

Journal of Intellectual Capital, vol. 21 no. 6
Type: Research Article
ISSN: 1469-1930

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Article
Publication date: 25 October 2011

Pirjo Ståhle, Sten Ståhle and Samuli Aho

The purpose of this study is to analyse the validity of the value added intellectual coefficient (VAIC) method as an indicator of intellectual capital.

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5223

Abstract

Purpose

The purpose of this study is to analyse the validity of the value added intellectual coefficient (VAIC) method as an indicator of intellectual capital.

Design/methodology/approach

The paper describes VAIC through its calculation formulae and aims to establish what exactly it is that the method measures. It also looks in detail at how intellectual capital is understood in the method, and discusses its conceptual confusions. Furthermore, the paper tests the hypothesis according to which VAIC correlates with a company's stock market value, and reflects the contradictory results of earlier studies.

Findings

The analyses show, first, that VAIC indicates the efficiency of the company's labour and capital investments, and has nothing to do with intellectual capital. Furthermore, the calculation method uses overlapping variables and has other serious validity problems. Second, the results do not lend support to the hypothesis that VAIC correlates with a company's stock market value. The main reasons behind the lack of consistency in earlier VAIC results lie in the confusion of capitalized and cash flow entities in the calculation of structural capital and in the misuse of intellectual capital concepts.

Practical implications

The analyses show that VAIC is an invalid measure of intellectual capital.

Originality/value

The result is important since the method has been widely used in micro and macro level analyses, but this is the first time it has been put to rigorous scientific analysis.

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Article
Publication date: 11 March 2014

Gianpaolo Iazzolino, Domenico Laise and Giuseppe Migliano

This study proposes a comparison between Value Added Intellectual Coefficient (VAIC) and one of the most important performance evaluation methods, the Economic Value Added

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2171

Abstract

Purpose

This study proposes a comparison between Value Added Intellectual Coefficient (VAIC) and one of the most important performance evaluation methods, the Economic Value Added (EVA), starting from a re-interpretation of the VAIC.

Design/methodology/approach

The empirical data were gathered from AMADEUS Bureau van Dijk and consist of 2,596 companies operating in Northern Italy, from six different economic sectors, observed for the year 2011. A correlation analysis was carried out in order to highlight whether there is a relationship between the two concepts of VAIC and EVA.

Findings

Results show that EVA and VAIC have no significant relationships; as a matter of fact, EVA is based on financial theory, whereas VAIC is focalised on the assessment of Intellectual Capital Efficiency (ICE).

Practical implications

Managers could be misled due to the fact that they often make decisions by taking into account only financial indicators such as EBIT, EVA, etc. Although methods like EVA have improved modern accounting systems, they do not take into account information linked to ICE. Therefore, these two perspectives can be useful in a context in which firms' performances are measured through multi-criteria methodologies (i.e. Balanced scorecard).

Originality/value

The proposal describes the differences between VAIC and EVA considering these two concepts as not contrasting. In fact, in order to better measure firms' performances, it could be useful to consider VAIC and EVA as an integrated vision in order to develop multi-criteria evaluation systems, rather than consider them separately.

Details

Measuring Business Excellence, vol. 18 no. 1
Type: Research Article
ISSN: 1368-3047

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Article
Publication date: 15 May 2019

Ayse Elvan Bayraktaroglu, Fethi Calisir and Murat Baskak

The purpose of this paper is to propose an extended and modified value-added (VA) intellectual coefficient (VAIC) model, which includes intellectual capital (IC…

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1970

Abstract

Purpose

The purpose of this paper is to propose an extended and modified value-added (VA) intellectual coefficient (VAIC) model, which includes intellectual capital (IC) components which were missing in the original VAIC approach. The proposed model has been used to explore the relationship between IC and firm performance for Turkish manufacturing firms on a more detailed level.

Design/methodology/approach

Multiple regression analysis has been employed to identify the IC components, which predict the performance of the firm and the moderating effect of some IC components on IC components–firm performance relationship. Data are required to calculate the IC components, and firm performance variables have been obtained from the financial reports of the Turkish manufacturing firms for the period 2003–2013.

Findings

According to the results for Turkish manufacturing sector innovation capital efficiency has a moderating effect on the relationship between structural capital efficiency (SCE) and profitability, meaning, depending on an increase in R&D expenses, the effect of SCE on profitability also increases. On the other hand, it has been found that innovation capital efficiency has a direct impact on firms’ productivity. The results also showed that IC efficiency components have a moderating role on the relationship between capital employed efficiency and profitability.

Research limitations/implications

There might be a time lag until the effect of R&D investments can be observed in firms’ performance. However, this lagged impact of innovation capital and also other IC components on future firm performance has not been investigated due to concerns related to sample size.

Originality/value

The proposed model differs from the original VAIC model in three ways: it, namely, includes two additional IC components, customer capital (CC) and innovation capital. It explores the moderating effect of innovation capital on structural capital–firm performance relationship and the moderating effect of IC components on employed capital–firm performance relationship. As the last difference, it proposes an alteration in the VA calculation due to newly added IC components, CC and innovation capital.

Details

Journal of Intellectual Capital, vol. 20 no. 3
Type: Research Article
ISSN: 1469-1930

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Article
Publication date: 11 March 2014

Domenico Celenza and Fabrizio Rossi

The aim of this paper is to investigate the relationship between corporate performance and Value Added Intellectual Coefficient (VAICTM) on the one hand, and the

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1058

Abstract

Purpose

The aim of this paper is to investigate the relationship between corporate performance and Value Added Intellectual Coefficient (VAICTM) on the one hand, and the relationship between the variations in market value and the variations in VAIC on the other hand.

Design/methodology/approach

Starting from the VAIC model, 23 Italian listed companies were examined with the aim of investigating the relationship between VAIC and the performance of the firms in the sample. The analysis was divided into two stages. In the first stage, eight models of linear regression were estimated to verify the presence of a positive and statistically significant relationship between M/BV and VAIC and between accounting performance indicators (ROE, ROI, ROS) and the VAIC. In the second stage, six other models were tested, considering as an independent variable the variations in VAIC and the variations in profitability indicators.

Findings

The outcomes of the application stress the importance of VAIC in the explanation of the variations in MV and its role as “additional coefficient” in the analysis of equity performance.

Originality/value

This methodology highlights some very interesting aspects. In particular, whereas the relationship between M/BV and VAIC and between profitability indicators (ROI, ROE, ROS) and VAIC is statistically insignificant, the subsequent analysis highlights the importance of VAIC as a variable capable of increasing the explanatory power of the regression in a cross-sectional perspective.

Details

Measuring Business Excellence, vol. 18 no. 1
Type: Research Article
ISSN: 1368-3047

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Article
Publication date: 25 October 2011

Martin Clarke, Dyna Seng and Rosalind H. Whiting

This study aims to examine the effect intellectual capital (IC) has on firm performance of Australian companies.

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7095

Abstract

Purpose

This study aims to examine the effect intellectual capital (IC) has on firm performance of Australian companies.

Design/methodology/approach

Quantitative data are collected for Australian companies listed between 2004 and 2008. IC is measured using Pulic's value added intellectual coefficient (VAIC) and its components (human, structural and capital employed efficiencies (HCE, SCE, CEE)). Direct and moderating relationships between VAIC, HCE, SCE, and CEE and four measures of performance are statistically analysed.

Findings

The results suggest that there is a direct relationship between VAIC and performance of Australian publicly listed firms, particularly with CEE and to a lesser extent with HCE. A positive relationship between HCE and SCE in the prior year and performance in the current year is also found. However evidence also suggests the possibility of an alternative moderating relationship between the IC components of HCE and SCE with physical and financial capital (CEE) which impacts on firm performance.

Research limitations/implications

There are some missing data and some transgression of the assumptions of OLS regression.

Originality/value

This paper presents the first study of the IC relationship with firm performance in Australia. Inconclusive results from prior studies in developing countries suggested the need for a study from a developed country such as Australia. The paper is also the first to investigate whether IC moderates the relationship between CEE and firm performance.

Details

Journal of Intellectual Capital, vol. 12 no. 4
Type: Research Article
ISSN: 1469-1930

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Article
Publication date: 7 January 2014

Sriranga Vishnu and Vijay Kumar Gupta

The purpose of this paper is to study the relationship between intellectual capital (IC) and performance of pharmaceutical firms in India. The secondary objective is to…

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2718

Abstract

Purpose

The purpose of this paper is to study the relationship between intellectual capital (IC) and performance of pharmaceutical firms in India. The secondary objective is to propose and test modified models of Value Added Intellectual Coefficient (VAIC™) method.

Design/methodology/approach

Data on 22 large pharmaceutical firms collected for empirical investigation. Return on assets and return on sales are performance variables. IC and its components – human capital, structural capital and relational capital (RC), are predictor variables. Three extended and modified VAIC™ models (e-VAIC™) are proposed. Multiple regression technique is applied on pooled data to draw inferences.

Findings

Results show instances of positive relationship between IC and performance variables. RC, the new variable, does not demonstrate statistically significant relationship with performance variables.

Research limitations/implications

Due to inadequate reporting of IC and its components, availability of data on various proxies is difficult. The new models proposed in this paper can be a template for future research and model development.

Practical implications

VAIC™ model, the proposed models (e-VAIC™) and the result analysis can be useful for evaluation and value creation purposes.

Originality/value

Previous researchers use original VAIC™ model. This paper modifies and extends the model in accordance with contemporary description and typology of IC. Inclusion of RC as a variable in VAIC™ model and use of new proxies for components of IC are the novelties of this paper.

Details

Journal of Intellectual Capital, vol. 15 no. 1
Type: Research Article
ISSN: 1469-1930

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Article
Publication date: 12 April 2013

Mahesh Joshi, Daryll Cahill, Jasvinder Sidhu and Monika Kansal

The purpose of this paper is to examine the intellectual capital (IC) performance of the Australian Financial Sector for the period 2006‐2008. It also aims to examine the…

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5093

Abstract

Purpose

The purpose of this paper is to examine the intellectual capital (IC) performance of the Australian Financial Sector for the period 2006‐2008. It also aims to examine the relationship between IC performance and the financial performance of the financial sector.

Design/methodology/approach

The value added intellectual coefficient (VAIC) approach developed by Pulic is used to determine the IC performance of the Australian financial sector. The required data to calculate different constituents of IC was obtained from the annual reports of Australian Financial Sector companies.

Findings

The value creation capability of financial sector in Australia is highly influenced by human capital. About two thirds of the sample companies have very low levels of intellectual capital efficiency. The performance of various components of VAIC and overall VAIC differs across all subsectors in the financial sector. Investment companies have high value VAIC due to higher a level of human capital efficiency, as compared to banks, insurance companies, diversified financials and RIETs. Insurance companies are more focussed on physical capital rather than human and structural capital leading to lower VAIC.

Research limitations/implications

The paper analyses IC performance of only one sector of the Australian economy and there is a relatively narrow three‐year period for the data collection. However, a comparative analysis of various sub sectors in the Australian financial sector justifies the contributions made by this study.

Practical implications

The findings may serve as a useful input for financial institutions to apply knowledge management in their institutions and in addressing the factors affecting IC performance in order to maximise their value creation. It will also help the management of companies in other sectors, especially those in knowledge‐based industries, in understanding the contributions of various components of intellectual capital in their growth.

Originality/value

This is the first paper that examines the relationship of intellectual capital performance with financial performance of financial sector companies in Australia.

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Article
Publication date: 19 April 2011

Samuel Kai Wah Chu, Kin Hang Chan and Wendy W.Y. Wu

This paper aims to investigate whether intellectual capital (IC) has an impact on the financial aspects of organizational performance as well as attempting to identify the…

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2101

Abstract

Purpose

This paper aims to investigate whether intellectual capital (IC) has an impact on the financial aspects of organizational performance as well as attempting to identify the IC components that are associated with corporate financial performance indicators that signal organizational growth.

Design/methodology/approach

This study drew on financial data from publicly available annual reports of all the constituent companies of the Hang Seng Index of the Hong Kong Stock Exchange for the years 2001‐2009. Following the value added intellectual coefficient™ (VAIC) methodology, regression models were constructed to examine the relationships between IC and the corporate financial performance indicators.

Findings

Evidence was found to suggest that IC, as measured by VAIC, was positively associated with profitability of businesses. In particular, structural capital, as a key component of IC, played a notable part in enhancing corporate profitability, and showed a growing trend in its significance. Empirical findings, based on correlation and linear multiple regression analysis, indicated that the components of VAIC were strong predictors of corporate financial performance such as return on equity and profitability. In particular, capital employed efficiency (CEE) was a significant predictor of all four corporate financial performance indicators.

Practical implications

The results may extend the understanding of the role of IC in business operations in Hong Kong, and may help to identify the specific IC drivers that may have a direct impact on the financial performance of these companies. In particular, although CEE was a significant predictor of all four corporate finance performance indicators, the increasing contribution of structural capital efficiency (SCE) in predicting ROA and ROE was observed. The role that structural capital plays in strengthening business performance warrants further investigation.

Originality/value

There has only been one previous empirical study on the intellectual capital of constituent companies on the Hong Kong Hang Seng Index. This study adds to the literature as the second study in the field. It is the first comparative study across two time periods of the above‐mentioned data.

Details

Journal of Intellectual Capital, vol. 12 no. 2
Type: Research Article
ISSN: 1469-1930

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