The Effects of Intellectual Capital on Financial Performance and Market Value: Evidence from Turkey

Abstract

In this study we aim to examine the effects of intellectual capital and its components on companies’ market value and financial performance in Turkey. The financial and market data of production companies listed in Borsa Istanbul 100 index (BIST-100) for the periods 2011 through 2014 are used as dataset. We selected three different measures for financial performance; ROA, ROE and Net Profit Margin, and one measure for market value; Market to Book Ratio. As independent variables, we firstly took Modified Value Added Coefficient (M-VAIC), secondly we took three components of M-VAIC. Besides, we added natural logarithm of assets to control for variation in asset size of companies and tested its significance. The results suggest multi factor models are more powerful than single factor model in explaining the market performance and financial performance. The paper also reveals that models explaining financial performance provide more accurate results than the models of market performance. The analysis also exposes that physical capital and human capital has a significant effect on financial performance whereas physical capital and relational capital has an influence on market performance.

Keywords

• Intellectual capital
• performance
• M-VAIC
• Market value
• Turkey