Exploring the relationship between intellectual capital and firm value: Evidence from the Indonesian banking sector

I Komang Rupa Agustina; Putu Dyan Yaniartha Sukartha

doi:10.31106/jema.v22i1.23942

Authors

I Komang Rupa Agustina Department of Accounting, Faculty of Economics and Business, Udayana University, Jimbaran
Putu Dyan Yaniartha Sukartha Department of Accounting, Faculty of Economics and Business, Udayana University, Jimbaran

DOI:

https://doi.org/10.31106/jema.v22i1.23942

Keywords:

Intellectual Capital, Innovation Capital, Customer Capital, Process Capital, Firm Value

Abstract

Intellectual capital has become a critical driver of firm value in the global shift toward a knowledge-based economy. Extensive research has explored intellectual capital, but most have used short periods, focused on broad industries, or combined all components into a single measure. Thus, to fill those gaps, this study empirically examines the relationship between intellectual capital components and firm value in the Indonesian banking sector. This study used proxies of human, innovation, customer, and process capital to offer insights into how intangible assets influence performance. Using multiple linear regression techniques, the analysis was based on panel data from banks listed on the Indonesia Stock Exchange from 2001-2022. The results revealed that innovation and customer capital are significantly associated with firm value, which aligns with resource-based theory. Only the capital adequacy ratio (CAR) significantly affects control variables. Innovation and customer capital are vital to firm value, while human and process capital are not. This finding highlights the need for bank managers and investors to prioritize intangible assets, especially innovation and customer relationships when evaluating and enhancing firm value.

References

Al-Khoury, A., Hussein, S. A., Abdulwhab, M., Aljuboori, Z. M., Haddad, H., Ali, M. A., Abed, I. A., & Flayyih, H. H. (2022). Intellectual capital history and trends: A bibliometric analysis using Scopus database. Sustainability, 14(18), 11615. https://doi.org/10.3390/su141811615

Anifowose, M., Abdul Rashid, H. M., Annuar, H. A., & Ibrahim, H. (2018). Intellectual capital efficiency and corporate book value: Evidence from Nigerian economy. Journal of Intellectual Capital, 19(3), 644–668. https://doi.org/10.1108/JIC-09-2016-0091

Barney, J. (1991). Firm resources and sustained competitive advantage. Journal of Management, 17(1), 99–120. https://doi.org/10.1177/014920639101700108

Bayraktaroglu, A. E., Calisir, F., & Baskak, M. (2019). Intellectual capital and firm performance: an extended VAIC model. Journal of Intellectual Capital, 20(3), 406–425. https://doi.org/10.1108/JIC-12-2017-0184

Chen, J., & Zhu, Z. (2004). Measuring intellectual capital: A new model and empirical study. Journal of Intellectual Capital, 5(1), 195–212. https://doi.org/10.1108/14691930410513003

Cuganesan, S. (2005). Intellectual capital-in-action and value creation: A case study of knowledge transformations in an innovation project. Journal of Intellectual Capital, 6(3), 357–373. https://doi.org/10.1108/14691930510611102

Dwimayanti, N. M. D., Sukartha, P. D. Y., Putri, I. G. A. M. A. D., & Sisdyani, E. A. (2023). Beyond profit: How ESG performance influences company value across industries?. JEMA: Jurnal Ilmiah Bidang Akuntansi dan Manajemen, 20(1), 43–65. https://doi.org/10.31106/jema.v20i1.20574

Edvinson, L., & Malone, M. S. (1997). Intellectual capital: realising your company’s true value by finding its hidden brainpower. New York: HarperBusiness.

Edvinsson, L., & Sullivan, P. (1996). Developing a model for managing intellectual capital. European Management Journal, 14(4), 356–364. https://doi.org/10.1016/0263-2373(96)00022-9

Ertugrul, M., Krishnan, K., Xu, B., & Yu, Q. (2023). Corporate patenting, customer capital, and financial market outcomes. Journal of Financial and Quantitative Analysis. https://doi.org/10.1017/S0022109023000194

Fu, F., Huang, S., & Wang, R. (2022). Why do U.S. firms invest less over time? Journal of Empirical Finance, 69, 15–42. https://doi.org/10.1016/j.jempfin.2022.07.012

Hair, J. F., Risher, J. J., Sarstedt, M., & Ringle, C. M. (2019). When to use and how to report the results of PLS-SEM. European Business Review, 31(1), 2–24. https://doi.org/10.1108/EBR-11-2018-0203

Hatane, S. E., Kuanda, E. S., Cornelius, E., & Tarigan, J. (2020). Corporate governance, market share, and intellectual capital disclosure: Evidence from the Indonesian agriculture and mining sectors. Jurnal Ilmiah Akuntansi Dan Bisnis, 15(1), 75. https://doi.org/10.24843/JIAB.2020.v15.i01.p07

Hayes, A. F., & Cai, L. (2007). Using heteroskedasticity-consistent standard error estimators in OLS regression: An introduction and software implementation. Behavior research methods, 39(4), 709-722. https://doi.org/10.3758/BF03192961

Helfat, C. E., & Peteraf, M. A. (2003). The dynamic resource‐based view: Capability lifecycles. Strategic Management Journal, 24(10), 997–1010. https://doi.org/10.1002/smj.332

Howcroft, B., Hewer, P., & Durkin, M. (2003). Banker-customer interactions in financial services. Journal of Marketing Management, 19(9–10), 1001–1020. https://doi.org/10.1080/0267257X.2003.9728248

Hsiao, S. H. (2014). PTE, innovation capital and firm value interactions in the biotech medical industry. Journal of Business Research, 67(12), 2636–2644. https://doi.org/10.1016/j.jbusres.2014.04.001

Khan, A., Qureshi, M. A., & Davidsen, P. I. (2020). How do oil prices and investments impact the dynamics of firm value? System Dynamics Review, 36(1), 74–100. https://doi.org/10.1002/sdr.1649

Kijek, T. (2014). Market valuation of innovation capital. International Journal of Innovation and Learning, 15(4), 411. https://doi.org/10.1504/IJIL.2014.062476

Knief, U., & Forstmeier, W. (2021). Violating the normality assumption may be the lesser of two evils. Behavior research methods, 53(6), 2576-2590. https://doi.org/10.3758/s13428-021-01587-5

Lehenchuk, S., & Zavalii, T. (2021). The impact of customer capital on company’s market value: An empirical study from 100 U.S. stock market leaders. International Journal of Management and Economics, 57(4), 299–312. https://doi.org/10.2478/ijme-2021-0025

Li, Y., & Zhao, Z. (2018). The dynamic impact of intellectual capital on firm value: Evidence from China. Applied Economics Letters, 25(1), 19–23. https://doi.org/10.1080/13504851.2017.1290769

Linggardjaja, I. K., & Isnalita, I. (2020). Impact of human resource investment on firm value. Jurnal Akuntansi Dan Bisnis, 20(1), 71–80. https://doi.org/https://doi. org/10.20961/jab. v20i1

Lyons, P., & Brennan, L. (2019). Assessing value from business-to-business services relationships: Temporality, tangibility, temperament, and trade-offs. Journal of Service Research, 22(1), 27–43. https://doi.org/10.1177/1094670518805569

Matthies, B. (2014). Process capital: A synthesis of research and future prospects. Knowledge and Process Management, 21(2), 91–102. https://doi.org/10.1002/kpm.1433

Mohammed, Z. O., & Ani, M. K. Al. (2020). The effect of intangible assets, financial performance and financial policies on the firm value: Evidence from the Omani industrial sector. Contemporary Economics, 14(3), 379–391. https://doi.org/10.5709/ce.1897-9254.411

Molloy, J. C., Chadwick, C., Ployhart, R. E., & Golden, S. J. (2011). Making intangibles “tangible” in tests of resource-based theory. Journal of Management, 37(5), 1496–1518. https://doi.org/10.1177/0149206310394185

Morlacco, M., & Zeke, D. (2021). Monetary policy, customer capital, and market power. Journal of Monetary Economics, 121, 116–134. https://doi.org/10.1016/j.jmoneco.2021.04.010

Ni, Y., Cheng, Y. R., & Huang, P. (2020). Do intellectual capitals matter to firm value enhancement? Evidence from Taiwan. Journal of Intellectual Capital, 22(4), 725–743. https://doi.org/10.1108/JIC-10-2019-0235

Oceantomo. (2020). Intangible Asset Market Value Study.

Odat, M., & Bsoul, R. (2022). The role of intellectual capital in firms’ performance and market value: Evidence from Jordan. International Journal of Management and Sustainability, 11(4), 258–272. https://doi.org/10.18488/11.v11i4.3232

Ovechkin, D., Boldyreva, N., & Davydenko, V. (2020). Intellectual capital and value: testing new IC measures in Russia. Journal of Economic Studies, 48(6), 1111–1127. https://doi.org/10.1108/JES-05-2020-0226

Pangestuti, D. C., Muktiyanto, A., Geraldina, I., & Darmawan. (2022). Role of profitability, business risk, and intellectual capital in increasing firm value. Journal of Indonesian Economy and Business, 37(3), 311–338. https://doi.org/10.22146/jieb.v37i3.3564

Pardiman, P. (2018). The effect of social capital and organizational commitment toward lecturer performance with islamic work ethics as a moderating role. JEMA: Jurnal Ilmiah Bidang Akuntansi dan Manajemen, 15(1), 12-26. https://doi.org/10.31106/jema.v15i01.779

Patthirasinsiri, N., & Wiboonrat, M. (2017). Measuring intellectual capital of science park performance for newly established science parks in Thailand. Kasetsart Journal of Social Sciences, 40, 82-90. https://doi.org/10.1016/j.kjss.2017.10.001

Putra, I. N. W. A., & Ratnadi, N. M. D. (2021). Intellectual capital and its disclosure on firm value. International Journal of Finance & Banking Studies, 10(1), 86–95. https://doi.org/10.20525/ijfbs.v10i1.1108

Ranani, H. S., & Bijani, Z. (2014). The impact of intellectual capital on the financial performance of listed companies in Tehran stock exchange. International Journal of Academic Research in Accounting, Finance and Management Sciences, 4(1), 119-127. https://doi.org/10.6007/IJARAFMS/v4-i1/548

Robiyanto, R., Putra, A. R., & Lako, A. (2021). The effect of corporate governance and intellectual capital toward financial performance and firm value of socially responsible firms. Contaduria y Administracion, 66(1), 1–24. https://doi.org/10.22201/fca.24488410e.2021.2489

Scafarto, V., Ricci, F., & Scafarto, F. (2016). Intellectual capital and firm performance in the global agribusiness industry. Journal of Intellectual Capital, 17(3), 530–552. https://doi.org/10.1108/JIC-11-2015-0096

Sisodia, G., Jadiyappa, N., & Joseph, A. (2021). The relationship between human capital and firm value: Evidence from Indian firms. Cogent Economics and Finance, 9(1), 1–16. https://doi.org/10.1080/23322039.2021.1954317

Smriti, N., & Das, N. (2018). The impact of intellectual capital on firm performance: A study of Indian firms listed in COSPI. Journal of Intellectual Capital, 19(5), 935–964. https://doi.org/10.1108/JIC-11-2017-0156

Soewarno, N., & Tjahjadi, B. (2020). Measures that matter: An empirical investigation of intellectual capital and financial performance of banking firms in Indonesia. Journal of Intellectual Capital, 21(6), 1085–1106. https://doi.org/10.1108/JIC-09-2019-0225

Sugiyono. (2019). Metode Penelitian Bisnis (Pendekatan Kuantitatif, Kualitatif, Kombinasi, dan R&D). Alfabeta.

Tseng, K.-A., Lin, C.-I., & Yen, S.-W. (2015). Contingencies of intellectual capitals and financial capital on value creation. Journal of Intellectual Capital, 16(1), 156–173. https://doi.org/10.1108/JIC-04-2014-0042

Tulcanaza-Prieto, A. B., Aguilar-Rodríguez, I. E., & Lee, C. W. (2022). Customer perception and its influence on the financial performance in the ecuadorian banking environment. Sustainability, 14(12), 6960. https://doi.org/10.3390/su14126960

Utami, H., & Alamanos, E. (2023). Resource-based theory: A review. TheoryHub Book. https://open. ncl. ac. uk.

Vomberg, A., Homburg, C., & Bornemann, T. (2015). Talented people and strong brands: The contribution of human capital and brand equity to firm value. Strategic Management Journal, 36(13), 2122–2131. https://doi.org/10.1002/smj.2328

Woiceshyn, J., & Eriksson, P. (2014). How innovation systems in finland and alberta work: Lessons for policy and practice. Innovation: Management, Policy and Practice, 16(1), 19–31. https://doi.org/10.5172/impp.2014.16.1.19

World Economic Forum. (2017). The Global Human Capital Report 2017. Retrieved from https://www.weforum.org/publications/the-global-human-capital-report-2017/