The stock market valuation of intellectual capital in the IT industry

Hung-Chao Yu (), Wen-Ying Wang and Chingfu Chang

Review of Quantitative Finance and Accounting, 2015, vol. 45, issue 2, 279-304

Abstract: This study adopts the P/V ratio developed from the residual income valuation model to examine whether Taiwan’s IT companies with more intellectual capital are more likely to be mispriced by the stock market. We focus on four types of intellectual capital: human capital (measured by employees holding graduate degrees and ratio of labor costs to net sales), innovation capital (measured by R&D intensity and royalty ratio), process capital (measured by working capital turnover and fixed asset turnover), and relational capital (measured by marketing expense ratio and sales growth rate). Using 751 firm-observations in Taiwan’s IT industry during 2003–2006, the empirical results show that Taiwan’s stock market appears to overprice IT companies’ innovation capital but underprice their human, process, and relational capital. Notably, the mispricing problem is more prominent on the human capital than on the other three types of intellectual capital. A further test indicates that the mispricing of intellectual capital is due to Taiwan’s domestic investors rather than foreign institutional investors. Particularly, the mispricing problem is more prominent on the human and relational capital. The implications of these findings are discussed. Copyright Springer Science+Business Media New York 2015

Keywords: Intellectual capital; Human capital; Innovation capital; Process capital; Relational capital; Mispricing; M41; G11; G32; G14 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://hdl.handle.net/10.1007/s11156-014-0437-5 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:rqfnac:v:45:y:2015:i:2:p:279-304

Ordering information: This journal article can be ordered from
http://www.springer.com/finance/journal/11156/PS2

DOI: 10.1007/s11156-014-0437-5

Access Statistics for this article

Review of Quantitative Finance and Accounting is currently edited by Cheng-Few Lee

More articles in Review of Quantitative Finance and Accounting from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().