SOURCE:

Faculty: Management Sciences
Department: Accountancy

CONTRIBUTORS:

Onyekwelu, U. L. F.
Okoye, E. I.

ABSTRACT:

This study examined the effect of Intellectual Capital(IC) on corporate valuation of quoted firms in Nigeria. This work adopted the Ex post-facto research design using the Panel Data. The study covered a period of ten years (2004-2013). Sample size of Twenty One(21) firms. Purposive Sampling Method select three firms from each of the seven sectors studied. Data were sourced from firms' annual financial statements and Nigerian Stock Exchange using content analysis approach. Six hypotheses guided the study. The independent variable is Intellectual Capital while the dependent variable is corporate valuation. Intellectual Capital was measured using Human Capital Efficiency (HCE), Structural Capital Efficiency(SCE) and Capital Employed Efficiency (CEE). The proxies for the dependent variable were Price Earnings (P/E)Ratio, Market to Book Value Ratio(M/BV), Earnings per Share(EPS), Net Assets per Share(NAPS), Gross Revenue per Share(GRPS) and Share Price(SP). The study adopted the Value Added Intellectual Coefficient (VAIC) Model as developed by Pulic (1998) to examine the effect of Intellectual Capital and firms' values. E-View Statistical Tool 8.0 was used in data analyses. Analyses were done using Multiple Regression and Correlation Coefficient Analysis. The analyses were done at 5% level of significance. Results revealed that HCE had a positive and significant effect on EPS, NAPS, GRPS and SP but showed it had a negative and insignificant influence on P/E Ratio. HCE had a positive and insignificant effect on M/BV Ratio. SCE had a positive and insignificant effect on P/E Ratio. It also had a negative and insignificant effect on firm’s EPS, M/BV and NAPS. SCE had a negative and significant effect on SP. Findings further indicate that CEE had positive and insignificant influence on P/E Ratio, M/BV Ratio, EPS and NAPS respectively. CEE had a negative and insignificant effect on GRPS and SP. The study concludes that Human Capital(HC) and Capital Employed(CE) if properly harnessed can tremendously enhance value creation potentials of firms in Nigeria. The implication of the findings is that investing in HE and CE will lead to growth in corporate values of firms in Nigeria while investing in structural capital can be counter-productive. The study therefore recommends that companies should invest substantial part of their earnings on human capital via co-ordinated knowledge development since it has the highest influence on firms and is also capable of stimulating other value creation potentialities to enhance firms’ values. They should also provide the much-needed infrastructure that will support a productive work force but devise strategies that could revamp the nature of their Structural Capital for it to support enhanced growth in corporate values.