Intellectual Capital And Corporate Performance- A Value Creation Efficiency Analysis

Introduction

“Intellectual capital”, as a term, has been commonly utilized in the current times in the field of research in the context of the developed world. Unfortunately, studies in the emerging economies concerning intellectual capital, specifically the evaluation of its implications for particular industries are few and far between. The widening gap between firms market and book value has obliterated the wide research attention concerning the invisible value that has been deleted from financial statements. It is commonly noted that the market value is well over the book value and in most current companies; intellectual capital occupies the most part of their market value.

Sampling plan

Convenience sampling technique is used to select the sample companies. Data for the study were generated from a sample of 35 technology intensive company including the one where we’ve completed our report. Among these 35 companies there are eight (28) Pharmaceuticals & Camical Company, seven (7) cement manufacturing company all are the DSE listed company

Measurement of variable

Dependend Variable

Return on Assets

Asset Turnover

Market-to-Book Value

Measurement of variable (Cont.)

Dependent variable The traditional measures of financial performance in this study are based on accounting measures, despite the susceptibility of its use. In this study, return on assets (ROA) is used as the measure of profitability, where:

o Return on Assets (ROA): Ratio of net income divided by book value of the total asset

o Asset Turnover (ATO): ratio of total revenue to book value of assets o Market-to-Book Value (M/B) ratios of equity: Market-to-book Value is the total

market capitalization to the book value of the net asset o Market value of common stock: No of share outstanding × Stock price at the end

of year o Book value of common stocks: Book value of shareholders‟ equity

Measurement of variable (Cont.)

Independent variable Value Added Intellectual Coefficient (VAIC) Human capital efficiency Structural capital efficiency Capital employed efficiency

Measurement of variable (Cont.)

Independent variable Value Added Intellectual Coefficient (VAIC) VAIC measures how effectively immobilized capital and intellectual capital contribute to the creation of business value for the firm, taking into consideration three main elements: human capital, structural capital, and physical capital. VAIC™ = (ICE + CEE)ICE is Intellectual capital efficiency and CEE is Capital employed efficiency. ICE = HCE + SCE HCE = Human capital efficiency, SCE = Structural capital efficiency

ROI Return on investment

ROA Return on asset

M/B Market-to-Book ratio

Ratio operating income and the invested capital

Ratio the net income before interest and the invested capital

Ratio between market value and book value

Performance indicators used in the empirical analysis

Descriptive statistics    

N Mean Std. DeviationVariance 

Independent variable Value added human capital coefficient; Ratio of total value added divided by total amount of salary and wages spent by firm for its employees

HCE

170 .4459 1.50195 2.255

Value added structural capital coefficient; Ratio of firm‟s structural capital divided by total value added.

SCE 170 .5598 1.50175 2.4079

Value added physical capital coefficient, Ratio of total value added divided by total amount of capital employed

CEE168 .5406 3.24895 10.555

Total Value added intellectual capital; Sum of CEE, HCE and SCE

VAIC 170 1.5398 3.23003 10.4330

Dependent variables Market valuation

Ratio of the firm‟s market capitalization to book value of the net asset

MB

170 27.5949 157.1596824699.165 

Productivity: Ratio of total turnover to total asset ATO 170 .8570 .97610 0.9527Profitability: Ratio of net income to total asset ROA 170 4.0437 8.42996 71.064

  Valid N (listwise) 168

     

Correlation Analysis Correlations

ROA ATO MB CEE HCE SCE VAIC

ROA Pearson Correlation 1 .031 .276** -.035 -.075 .074 -.036

Sig. (2-tailed) .685 .000 .653 .330 .337 .639

N 170 170 168 170 170 170

ATO Pearson Correlation 1 -.024 .043 .101 -.100 .044

Sig. (2-tailed) .757 .579 .188 .193 .571

N 170 168 170 170 170

MB Pearson Correlation 1 -.018 -.046 .045 -.019

Sig. (2-tailed) .821 .552 .556 .808

N 168 170 170 170

CEE Pearson Correlation 1 -.031 .030 1.000**

Sig. (2-tailed) .692 .695 .000

N 168 168 168

HCE Pearson Correlation 1 -1.000** -.019

Sig. (2-tailed) .000 .810

N 170 170

SCE Pearson Correlation 1 .019

Sig. (2-tailed) .809

N 170

VAIC Pearson Correlation 1

Sig. (2-tailed)

N

**. Correlation is significant at the 0.01 level (2-tailed).

Linear Multiple Regression results:  Model 1

Market Valuation

Model 2 Profitability

Model 3 Productivity

N 170 170 170R (predictors) .019 .036 .044F-Statistics .059 .220 .322Significance .808 .639 .571  t-stat t-stat t-statIntercept 2.165 5.832 10.062VAIC -.244 .000 .000

Linear Multiple Regression results:

Model Market valuation

Model 4Market Valuation

Model 5 Profitability

Model 6 Productivity

N 170 170 170R (Predictors) .042 .085 .124F – (Statistics) .098 .400 .852Significance .961 .753 .467  t-stat t-stat t-statIntercept .284 .783 -.054CEE -.190 -.529 .471HCE -.242 -.481 .605SCE -.204 -.554 .513

ConclusionThis report represent an insight of Intellectual capital and corporate performance of the 35 technology intensive organization listed in DSE among which there are 28 Pharmaceuticals manufacturing company seven cement producing company.It provides the opportunity to initiate with practical acquaintance and implement academic knowledge into practical field. The goal of this analysis is to expose the student in the organizational work situation and provide an opportunity for applying academic learning into reality. There are some difference between theories and practice. Presentation and report making program is such an arrangement by which an intern can face work related complexities and way of resolving such complexities. The research reviews the literature pertaining to the assessment of knowledge assets of the 35 selected companies. Since knowledge assets are the crux of sustainable competitive advantages, the burgeoning field of intellectual capital is an exciting area for both research and practitioners. Unfortunately, the measurement of such intangibles assets is difficult. A variety of models have suffered in an attempt to measure IC and this paper aims to highlight their implication in reality based on the sampled Bangladeshi manufacturing companies.