The purpose of this paper is to show that intellectual capital (IC) efficiency as measured by the value added intellectual coefficient (VAIC) and its individual components may function as key performance indicators for use in management control and external reporting to capital market participants. We incorporate the VAIC within the Ohlson model (OM), a widely used model for equity valuation, which relates a firm’s market value to the book value of equity and net earnings, and allows to include any other information that may affect the market assessment of firm value. We then estimate the modified OM on a panel sample of firms continuously listed on the Italian Stock exchange from 2011 to 2017 using a fixed effect (FE) specification.
Empirical results indicate that IC efficiency contributes along with the traditional accounting metrics included in the OM to explain the stock market performance of sample firms.
This paper suggests that the VAIC and the individual measures of IC efficiency may usefully complement traditional accounting measures of performance.
Keywords: management control, intellectual capital efficiency, value relevance, Ohlson equity valuation model.
