African Journal of
Business Management

  • Abbreviation: Afr. J. Bus. Manage.
  • Language: English
  • ISSN: 1993-8233
  • DOI: 10.5897/AJBM
  • Start Year: 2007
  • Published Articles: 4062

Full Length Research Paper

MtB versus VAIC in measuring intellectual capital: Empirical evidence from Italian listed companies

William Forte
  • William Forte
  • Management and Innovation Systems Department, University of Salerno 132, Giovanni Paolo II Street 84084 Fisciano (SA) – Italy.
  • Google Scholar
Gaetano Matonti
  • Gaetano Matonti
  • Management and Innovation Systems Department, University of Salerno 132, Giovanni Paolo II Street 84084 Fisciano (SA) – Italy.
  • Google Scholar
Giuseppe Nicolo
  • Giuseppe Nicolo
  • Management and Innovation Systems Department, University of Salerno 132, Giovanni Paolo II Street 84084 Fisciano (SA) – Italy.
  • Google Scholar
Jon Tucker
  • Jon Tucker
  • Visiting Professor in Finance and Accounting, Coventry University, United Kingdom.
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  •  Received: 17 June 2019
  •  Accepted: 19 August 2019
  •  Published: 30 November 2019

Abstract

The purpose of this paper is to compare two of the most commonly utilized methods employed to measure the Intellectual Capital (IC) value: Market to Book (MtB) ratio and the Value Added Intellectual Coefficient (VAIC), in order to determine the most suitable in the context of Italian listed firms and their respective relationships with some key IC determinants. The study is conducted for a sample of Italian listed firms over the period 2009-2014. Different tests are employed to compare VAIC and MtB, while two linear panel regression models with fixed effects models are performed in order to test the relationship between IC value and selected determinants. The results suggest that the MtB ratio is a better estimator of IC value than VAIC. MtB, IA and profitability – are significant positive drivers, while leverage and size are significant negative drivers. For VAIC, only profitability and leverage are significant determinants, both having a positive effect. Recognised limitations in measuring IC value through MtB are partially mitigated because the sample is composed of listed companies preparing financial statements according to IFRS since 2005. Managers should try to avoid rigidity in their organisational structure and to focus on an IC investment strategy. The results could be beneficial for financial analysts and investors in selecting the best method for IC measurement. The paper makes an innovative comparison between two alternative IC metrics, to determine which is more effective in capturing IC value in an Italian listed firms’ context. Further, it identifies some key determinants of IC value.

 

Key words: Intellectual capital, intangible assets, market-to-book ratio, value added intellectual coefficient (VAIC), Italian listed firms.