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

Muhammad Madyan (), Iksan Nugraha (), Wisudanto Wisudanto (), Rahmat Setiawan () and Novian Firdausi ()
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Muhammad Madyan: Faculty of Economics and Business, Airlangga University
Iksan 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 Firdausi: Faculty of Economics and Business, Airlangga University

Economics Bulletin, 2022, vol. 42, issue 2, 294 - 302

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.

Keywords: Financial performance; firm value; indonesia stock market; intellectual capital (search for similar items in EconPapers)
JEL-codes: G3 L2 (search for similar items in EconPapers)
Date: 2022-06-30
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