The Value Relevance of Intellectual Capital on the Firm's Market Value : An Empirical Survey on the Italian Listed Firms

The purpose of the paper is to investigate the value relevance of intellectual capital for the Italian investors. The paper uses the Ohlson model (1995) draws on 360 firm-year observations of the publicly listed companies on the Italian Stock Exchange between the years 2006 at 2008. It is empirical study using panel data Ordinary Least Squares (OLS) for the data analysis. The paper identifies the IC variables as the 'other information variable' of the Ohlson model. The findings show that the fundamental variables of the Ohlson model (Book value and Earning) are positively related to the market value. On the contrary, the IC variables, which reflect the Human Capital, the Relation Capital, the Innovation Capital and the Process Capital, do not present a meaningful relation with the market value, except for the last one. In conclusion, our results imply that investors do not seem to be able to detect and incorporate the intellectual capital information as represented in the IC proxies chosen for the research into their business valuation process. The major interest of the paper is that it represents one of the few studies that explicitly examined the value relevance of intellectual capital in investors’ business valuation. Post print (i.e. final draft post-refereeing version on an article published on International Journal of Knowledge-Based Development, DOI: 10.1504/IJKBD.2011.040626