An empirical investigation of the relationship between intellectual capital and firms’ market value and financial performance

Abstract

The objective of this paper is to investigate the relationship between the value creation efficiency and firms’ market valuation as well as financial performance, using data drawn from Taiwanese listed companies. Our results support the proposition that intellectual capital has a positive impact on corporate market value and financial performance, and may be a leading indicator for future financial performance. In addition, we also found investors may place different value on the three components of value creation efficiency (physical capital, human capital and structural capital). Finally, our results suggest that R&D expenditure may capture information on structural capital and has a positive effect on firm value and profitability.