MEASURING INTELLECTUAL CAPITAL AS A DRIVER OF CORPORATE VALUE

Date
2011-10-14
Authors
Singh, Avinash J.
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Abstract
The study sought to test the applicability of a methodology proposed by Professor Baruch Lev to measure the value of intangible capital of 17 non-financial companies listed on the JSE Securities Exchange and to ascertain whether intangible measures have superior predictive capabilities to traditional accounting measures with regards to shareholder returns. Intangible driven earnings (IDE), intangible capital value and comprehensive values (net asset value plus intangible capital) were determined for the sample companies. Although IDE growth displayed no correlation to shareholder returns in the same period it did so for shareholder returns in a subsequent period. Market-to-comprehensive (M/C) value displayed stronger negative correlation to shareholder returns in a subsequent period versus the traditional market-to-book (M/B) value confirming the superior ability of M/C values in distinguishing between overvalued and undervalued shares. From the research it would appear that both IDE growth and M/C values possess strong predictive capabilities of future shareholder returns and could be used by investors in pursuit of abnormal returns
Description
MBA thesis - WBS
Keywords
Intellectual capital , Knowledge management
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