IDEAS home Printed from https://ideas.repec.org/a/ebl/ecbull/eb-20-00523.html
   My bibliography  Save this article

Building firm value and financial performance through intellectual capital: the Indonesia stock exchange's experience

Author

Listed:
  • Muhammad Madyan

    (Faculty of Economics and Business, Airlangga University)

  • Iksan Abdi Nugraha

    (Faculty of Economics and Business, Airlangga University)

  • Wisudanto Wisudanto

    (Faculty of Economic and Business, Airlangga University)

  • Rahmat Setiawan

    (Faculty of Economics and Business, Airlangga University)

  • Novian Abdi Firdausi

    (Faculty of Economics and Business, Airlangga University)

Abstract

This study aims to assess the effect of intellectual capital and its components on firm value and financial performance. Using sample firms on each sectors in the Indonesian Stock Exchange within 2014-2018 time period, intellectual capital is measured through VAIC™ and its components which are capital employed efficiency (CEE), human capital efficiency (HCE), and structural capital efficiency (SCE). While firm value and financial performance is measured through market-to-book value (MBV) and return on equity (ROE) respectively. Results of the study indicate that VAIC™ alone has a significant positive effect on MBV and ROE. CEE and HCE also have a positive significant effect on both MBV and ROE, but SCE has an insignificant but mixed effect with negative effect on MBV and positive effect on ROE. This result may be attributed to bad business cycle and major financial restatements within study period. Control variables such as firm size and leverage both have a positive effects with firm size has a significant effect while leverage is insignificant to firm value and financial performance.

Suggested Citation

  • Muhammad Madyan & Iksan Abdi Nugraha & Wisudanto Wisudanto & Rahmat Setiawan & Novian Abdi Firdausi, 2022. "Building firm value and financial performance through intellectual capital: the Indonesia stock exchange's experience," Economics Bulletin, AccessEcon, vol. 42(2), pages 294-302.
    • Handle: RePEc:ebl:ecbull:eb-20-00523
    as

    Download full text from publisher

    File URL: http://www.accessecon.com/Pubs/EB/2022/Volume42/EB-22-V42-I2-P27.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Norman Mohd Saleh & Mara Ridhuan Che Abdul Rahman & Mohamat Sabri Hassan, 2009. "Ownership Structure and Intellectual Capital Performance in Malaysia," Asian Academy of Management Journal of Accounting and Finance (AAMJAF), Penerbit Universiti Sains Malaysia, vol. 5(1), pages 1-29.
    2. Jian Xu & Binghan Wang, 2018. "Intellectual Capital, Financial Performance and Companies’ Sustainable Growth: Evidence from the Korean Manufacturing Industry," Sustainability, MDPI, vol. 10(12), pages 1-15, December.
    3. Law Teck Poh & Adem Kilicman & Siti Nur Iqmal Ibrahim, 2018. "On intellectual capital and financial performances of banks in Malaysia," Cogent Economics & Finance, Taylor & Francis Journals, vol. 6(1), pages 1453574-145, January.
    4. Per Nikolaj Bukh, 2003. "The relevance of intellectual capital disclosure: a paradox?," Accounting, Auditing & Accountability Journal, Emerald Group Publishing Limited, vol. 16(1), pages 49-56, March.
    5. Boujelbene, Mohamed, 2013. "The impact of intellectual capital disclosure on cost of equity capital: A case of French firms," Journal of Economics, Finance and Administrative Science, Universidad ESAN, vol. 18(34), pages 45-53.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jian Xu & Muhammad Haris & Hongxing Yao, 2019. "Should Listed Banks Be Concerned with Intellectual Capital in Emerging Asian Markets? A Comparison between China and Pakistan," Sustainability, MDPI, vol. 11(23), pages 1-23, November.
    2. Oksana Pirogova & Olga Voronova & Tatyana Khnykina & Vladimir Plotnikov, 2020. "Intellectual Capital of a Trading Company: Comprehensive Analysis Based on Reporting," Sustainability, MDPI, vol. 12(17), pages 1-21, August.
    3. Hongxing Yao & Muhammad Haris & Gulzara Tariq & Hafiz Mustansar Javaid & Muhammad Aamir Shafique Khan, 2019. "Intellectual Capital, Profitability, and Productivity: Evidence from Pakistani Financial Institutions," Sustainability, MDPI, vol. 11(14), pages 1-30, July.
    4. Eze, Solomon Uchechukwu & Akam, Godwin Uche & Okeke, M. C, 2022. "Entrepreneurial Skill Acquisition and Human Capital Development of State Universities Students in South-East, Nigeria," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 6(12), pages 571-578, December.
    5. Mihaela Brindusa Tudose & Valentina Diana Rusu & Silvia Avasilcai, 2021. "Performance Management for Growth: A Framework Based on EVA," JRFM, MDPI, vol. 14(3), pages 1-19, March.
    6. Vincenzo Scafarto & Federica Ricci & Elisabetta Magnaghi & Salvatore Ferri, 2021. "Board structure and intellectual capital efficiency: does the family firm status matter?," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 25(3), pages 841-878, September.
    7. Ratapol Wudhikarn & Nopasit Chakpitak & Gilles Neubert, 2020. "Improving the Strategic Benchmarking of Intellectual Capital Management in Logistics Service Providers," Post-Print hal-03188190, HAL.
    8. Stropnik Neca & Korošec Bojana & Tominc Polona, 2017. "The Relationship Between the Intellectual Capital Disclosure and Cost of Debt Capital – A Case of Slovenian Private Audited Organisations," Naše gospodarstvo/Our economy, Sciendo, vol. 63(4), pages 3-16, December.
    9. Tutun Mukherjee & Som Sankar Sen, 2022. "Impact of CEO attributes on corporate reputation, financial performance, and corporate sustainable growth: evidence from India," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 8(1), pages 1-50, December.
    10. Muhammad Wasim Jan Khan, 2014. "A Critical Review of Empirical Studies in Intellectual Capital Literature," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 4(11), pages 159-176, November.
    11. Elwira Gross-Gołacka & Marta Kusterka-Jefmańska & Bartłomiej Jefmański, 2020. "Can Elements of Intellectual Capital Improve Business Sustainability?—The Perspective of Managers of SMEs in Poland," Sustainability, MDPI, vol. 12(4), pages 1-23, February.
    12. Agus Joko Pramono & Suwarno & Firdaus Amyar & Renny Friska, 2023. "Sustainability Management Accounting in Achieving Sustainable Development Goals: The Role of Performance Auditing in the Manufacturing Sector," Sustainability, MDPI, vol. 15(13), pages 1-13, June.
    13. Angel Sevil & Alfonso Cruz & Tomas Reyes & Roberto Vassolo, 2022. "When Being Large Is Not an Advantage: How Innovation Impacts the Sustainability of Firm Performance in Natural Resource Industries," Sustainability, MDPI, vol. 14(23), pages 1-20, December.
    14. Ngoc Phu Tran & Co Thi Huyen Dinh & Hien Thi Thu Hoang & Duc Hong Vo, 2022. "Intellectual Capital and Firm Performance in Vietnam: The Moderating Role of Corporate Social Responsibility," Sustainability, MDPI, vol. 14(19), pages 1-13, October.
    15. Muhammad Haris & HongXing Yao & Gulzara Tariq & Ali Malik & Hafiz Mustansar Javaid, 2019. "Intellectual Capital Performance and Profitability of Banks: Evidence from Pakistan," JRFM, MDPI, vol. 12(2), pages 1-26, April.
    16. Ioniţă Cătălin Gabriel, 2022. "Exploration vs. Exploitation: How Innovation Strategies Impact Firm Performance and Competitive Advantage," Proceedings of the International Conference on Business Excellence, Sciendo, vol. 16(1), pages 31-46, August.
    17. Salvi, Antonio & Vitolla, Filippo & Giakoumelou, Anastasia & Raimo, Nicola & Rubino, Michele, 2020. "Intellectual capital disclosure in integrated reports: The effect on firm value," Technological Forecasting and Social Change, Elsevier, vol. 160(C).
    18. Ratapol Wudhikarn & Nopasit Chakpitak & Gilles Neubert, 2020. "Improving the Strategic Benchmarking of Intellectual Capital Management in Logistics Service Providers," Sustainability, MDPI, vol. 12(23), pages 1-25, December.
    19. Raquel Ortega-Lapiedra & Miguel Marco-Fondevila & Sabina Scarpellini & Fernando Llena-Macarulla, 2019. "Measurement of the Human Capital Applied to the Business Eco-Innovation," Sustainability, MDPI, vol. 11(12), pages 1-16, June.
    20. Redhwan Ahmed al-Dhamari & Ku Nor Izah Ku Ismail, 2013. "Governance Structure, Ownership Structure and Earnings Predictability: Malaysian Evidence," Asian Academy of Management Journal of Accounting and Finance (AAMJAF), Penerbit Universiti Sains Malaysia, vol. 9(1), pages 1-23.

    More about this item

    Keywords

    Financial performance; firm value; indonesia stock market; intellectual capital;
    All these keywords.

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ebl:ecbull:eb-20-00523. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: John P. Conley (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.