This work is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.
Authors retain ownership of the copyright for their content.
THE EFFECTS OF INTELLECTUAL CAPITAL ON FIRM PERFORMANCE OF INDUSTRIAL SECTOR IN JORDAN
Corresponding Author(s) : Nurasyikin Jamaludin
Humanities & Social Sciences Reviews,
Vol. 8 No. 2 (2020): March
Purpose of the study: This paper aims to examine whether intellectual capital (IC), measured through the value-added intellectual coefficient (VAICTM) affects the firm performance of the industrial sector in the Amman Stock Exchange (ASE).
Methodology: The sample comprised 50 industrial companies listed in ASE over the period 2008-2017. The methodology included estimating the impact of IC, measured through VAICTM and its components on the market to book ratio (M/B) and earning per share (EPS). Research hypotheses were tested through the display of descriptive statistics, multicollinearity, normality tests, correlation matrix, and multiple regression models.
Main Findings: The results indicate a positive relationship between VAICTM with the M/B ratio and EPS. As for the M/B ratio, the result is a positive significant relationship for the CEE but not for the SCE, and HCE. However, the results are counterproductive for EPS and found HCE, and SCE has a significant impact on the EPS but CEE not significant.
Applications: The results suggest that industrial companies in Jordan must hold practical and knowledge experiences because it is vital for their competitive advantage, and must reduce unemployment rates by employing new employees with expertise and skills. The present study integrates previous methodologies in order to investigate the relationships between IC and firm performance of industrial companies listed on the ASE.
Novelty/Originality of this study: This study extends previous studies on intellectual capital and firm performance in Jordan by incorporating more samples and the latest period of study. In addition, it also shed some new findings on the effect of intellectual capital on the M/B ratio and EPS.
Download CitationEndnote/Zotero/Mendeley (RIS)
- Ahmad, M., & Ahmed, N. (2016). Testing the relationship between intellectual capital and a firm’s performance: an empirical investigation regarding the financial industries of Pakistan. International Journal of Learning and Intellectual Capital, 13(2/3), 250. https://doi.org/10.1504/IJLIC.2016.075691
- Al-shubiri, F. N. (2011). Testing the Relationship between the Efficiency of Value Added Intellectual Coefficient and Corporate Performance at Commercial Banks in Amman Stock Exchange (ASE). Zagreb International Review of Economics & Business, 14(1), 1–22.
- Andreeva, T., & Garanina, T. (2016). Do all elements of intellectual capital matter for organizational performance? Evidence from the Russian context. Journal of Intellectual Capital, 17(2), 397–412. https://doi.org/10.1108/JIC-07-2015-0062
- Asadollahi, S. Y., & Niazian, M. (2013). The relationship between intellectual capital and earnings predictability in the companies listed in the Tehran stock exchange. European Online Journal of Natural and Social Sciences, 2(3), 243–250.
- Belkaoui, A. R. (2003). Intellectual Capital and Firm Performance of U.S. Multinational Firms: A study of the Resource-Based and Stakeholder Views. Journal of Intellectual Capital, 4(2), 1–26. h https://doi.org/10.1108/14691930310472839
- Chang, W. S., & Hsieh, J. J. (2011). Intellectual Capital and Value Creation-Is Innovation Capital a Missing Link? International Journal of Business and Management, 6(2), 2–12. https://doi.org/10.5539/ijbm.v6n2p3
- Chatzoudes, D., Maditinos, D., Theriou, G., & Tsairidis, C. (2011). The impact of intellectual capital on firms’ market value and financial performance. Journal of Intellectual Capital, 12(1), 132–151. https://doi.org/10.1108/14691931111097944
- Chu, S. K. W., Chan, K. H., Yu, K. Y., Ng, H. T., & Wong, W. K. (2011). An Empirical Study of the Impact of Intellectual Capital on Business Performance. Journal of Information & Knowledge Management, 10(01), 11–21. https://doi.org/10.1142/S0219649211002791
- Dalila, Latif, H., Jaafar, N., Aziz, I., & Afthanorhan, A. (2020). The mediating effect of personal values on the relationships between attitudes, subjective norms, perceived behavioral control and intention to use. Management Science Letters, 10(1), 153-162. https://doi.org/10.5267/j.msl.2019.8.007
- Edvinsson, L. (1997). Developing intellectual capital at Skandia. Long Range Planning, 30(3), 366–373. https://doi.org/10.1016/S0024-6301(97)90248-X
- Firer, S, & Stainbank, L. (2003). Testing the relationship between intellectual capital and a company’s performance : Evidence from the South Africa University of Natal Durban. Meditari Accountancy Research, 11(April 2003), 25–44. https://doi.org/10.1108/10222529200300003
- Firer, Steven, Williams, S. M., & Firer, S. (2003). Intellectual capital and traditional measures of corporate performance. Journal of Intellectual Capital, 4(3), 348–360. https://doi.org/10.1108/14691930310487806
- Ghosh, S. K., & Maji, S. G. (2015). Empirical Validity of Value Added Intellectual Coefficient Model in Indian Knowledge-based Sector. Global Business Review, 16(6), 947–962. https://doi.org/10.1177/0972150915597597
- Gibson, C. H. (2011). Financial Reporting & Analysis Using Financial Accounting Information.
- Girma, B. (2017). Intellectual Capital Efficiency and Its Impact on Financial Performances of Ethiopian Commercial Banks. Research Journal of Finance and Accounting, 8(8), 17–31.
- Haan, A. A.-A., AL-Sakin, S. A.-K., & AL-sufy, F. J. H. (2016). The Effect of Value Added Intellectual Coefficient on Firms’ performance: Evidence from the Jordanian Industrial Sector. Research Journal of Finance and Accounting, 7(14), 163–174.
- Hair, J. F., Black, W. C., Babin, B. J., & Anderson, R. E. (2014). Multivariate Data Analysis (Seventh Ed).
- Hill, R., Murphy, G., & Trailer, J. (1996). Measuring performance in entrepreneurship research. Journal of Business Research, 36(1), 15–23. https://doi.org/10.1016/0148-2963(95)00159-X
- Kamath, G. B. (2015). Impact of Intellectual Capital on Financial Performance and Market Valuation of Firms in India. International Letters of Social and Humanistic Sciences, 48(1997), 107–122. https://doi.org/10.18052/www.scipress.com/ILSHS.48.107
- Lee, C. C., & Lin, C. K. (2018). The major determinants of influencing the operating performance from the perspective of intellectual capital: Evidence on the CPA industry. Asia Pacific Management Review. https://doi.org/10.1016/j.apmrv.2018.01.006
- Martí, J. M. V. (2003). In Search of an Intellectual Capital General Theory. Electronic Journal of Knowledge Management, 1(2), 213–226. Retrieved from http://www.ejkm.com/search/?name=keywords&value= strategic management
- Momani, K. M. K., & Nour, A. N. I. (2019). The influence of intellectual capital on the return of equity among banks listed on the Amman Stock Exchange. International Journal of Electronic Banking, 1(3), 220. https://doi.org/10.1504/IJEBANK.2019.099613
- Murale, V., Jayaraj, R., & Ashrafali. (2010). Impact of Intellectual Capital on Firm Performance : A Resource-Based View Using VAIC Approach. International Journal of Business Management, Economics and Information Technology, 2(2), 283–292. https://doi.org/10.1109/PECI.2015.7064933
- Nadeem, M., Gan, C., & Nguyen, C. (2018). The Importance of Intellectual Capital for Firm Performance: Evidence from Australia. Australian Accounting Review, 28(3), 334–344. https://doi.org/10.1111/auar.12184
- Nazari, J. A., & Herremans, I. M. (2007). Extended VAIC model: Measuring intellectual capital components. Journal of Intellectual Capital, 8(4), 595–609. https://doi.org/10.1108/14691930710830774
- Nuryaman, (2015). The Influence of Intellectual Capital on The Firm’s Value with The Financial Performance as an Intervening Variable. Procedia - Social and Behavioral Sciences, 211(September), 292–298. https://doi.org/10.1016/j.sbspro.2015.11.037
- Nwakuya, M. T., & Ijomah, M. A. (2017). Fixed Effect versus Random Effects Modelling in a Panel Data Analysis; A Consideration of Economic and Political Indicators in Six African Countries. International Journal of Statistics and Applications, 7(6), 275–279. https://doi.org/10.1016/j.sbspro.2015.11.037
- Petrash, G. (1996). Dow’s journey to a knowledge value management culture. European Management Journal, 14(4), 365–373. https://doi.org/10.1016/0263-2373(96)00023-0
- Pew Tan, H., Plowman, D., & Hancock, P. (2007). Intellectual capital and financial returns of companies. Journal of Intellectual Capital, 8(1), 76–95. https://doi.org/10.1108/14691930710715079
- Pouraghajan, A., Ramezani, A., & Mohammadzadeh, S. (2013). Impact of Intellectual Capital on Market Value and Firms’ Financial Performance : Evidence from Tehran Stock Exchange. World of Sciences Journal, 1(12), 197–208.
- Pulic, A. (1998). Measuring the performance of intellectual potential in the knowledge economy. In the 2nd" World Congress on the Management of Intellectual Capital" (pp. 1–20).
- Pulic, A. (2000). VAIC TM – an accounting tool for IC management Ante Pulic. Int. J. Technology Management, 20, 702–714. https://doi.org/10.1504/IJTM.2000.002891
- Pulic, A. (2004). Intellectual capital – does it create or destroy value? Measuring Business Excellence, 8(1), 62–68. https://doi.org/10.1108/13683040410524757
- Pulic, A. (2008). The Principles of Intellectual Capital Efficiency - A Brief Description. Croatian Intellectual Capital Center, Zagreb, (February), 2–25. https://doi.org/10.1504/IJEIM.2004.005479
- Ramanauskaitė, A., & Rudžionienė, K. (2013). Intellectual Capital Valuation: Methods and Their Classification. Issn Ekonomika, 92(2), 1392–1258. https://doi.org/10.15388/Ekon.2013.0.1413
- Sedeaq Nassar. (2018). The Impact of Intellectual Capital on Firm Performance of the Turkish Real Estate Companies Before and After the Crisis. European Scientific Journal, 14(1), 29–45. https://doi.org/10.19044/esj.2018.v14n1p29
- Sherif, M., & Elsayed, M. (2016). The Impact of Intellectual Capital on Corporate Performance: Evidence from the Egyptian Insurance Market. International Journal of Innovation Management, 20(03), 1650034. https://doi.org/10.1142/S1363919616500341
- Smriti, N., & Das, N. (2017). Impact of Intellectual Capital on Business Performance: Evidence from the Indian Pharmaceutical Sector. Polish Journal of Management Studies, 15(1), 232–243. https://doi.org/10.17512/pjms.2017.15.1.22
- Smriti, N., & Das, N. (2018). The impact of intellectual capital on firm performance: a study of Indian firms listed in COSPI. Journal of Intellectual Capital, 19(5), 935–964. https://doi.org/10.1108/JIC-11-2017-0156
- Stewart, T., & Ruckdeschel, C. (1998). Intellectual capital: The new wealth of organizations. Performance Improvement, 37(7), 56–59. https://doi.org/10.1002/pfi.4140370713
- Suhendra, E. S. (2016). The Influence of Intellectual Capital on Firm Value towards Manufacturing Performance in Indonesia. International Conference on Eurasian Economies, 10(4), 438–445.
- Sullivan, P. H. (2000). Valuing intangible companies- an intellectual capital approach. Journal of Intellectual Capital, 1(4), 328–340. https://doi.org/10.1108/14691930010359234
- Tabachnick, B. G., & Fidell, L. S. (2013). Using Multivariate Statistics. (Craig Campanella, Ed.) (Six editions). United States of America: Pearson Education, Inc.
- Ulum, I., Ghozali, I., & Purwanto, A. (2014). Intellectual Capital Performance of Indonesian Banking Sector: A Modified VAIC (M-VAIC) Perspective. Asian Journal of Finance & Accounting, 6(2), 103–123. https://doi.org/10.5296/ajfa.v6i2.5246
- Yilmaz, I., & Acar, G. (2018). The Effects of Intellectual Capital on Financial Performance and Market Value: Evidence from Turkey. Eurasian Journal of Business and Economics, 11(21), 117–133. https://doi.org/10.17015/ejbe.2018.021.07