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MtB versus VAIC in measuring intellectual capital: Empirical evidence from Italian listed companies

Forte, William; Matonti, Gaetano; Tucker, Jon; Nicolo, Giuseppe


William Forte

Gaetano Matonti

Giuseppe Nicolo


Purpose – Grounded in the extant theoretical and empirical literature, the purpose of this paper is to compare two of the most employed methods measuring IC value in order to find the most suitable in the context of Italian listed firms. Moreover, this paper also investigates the relationship between Intellectual Capital (IC), measured in terms of the Market to Book (MTB) ratio, and the Value Added Intellectual Coefficient (VAIC), and potential key determinants of IC value including intangible assets (IA) and a range of other factors.
Design/methodology/approach – The study is conducted for a sample of Italian listed firms over the period 2011-2015. Applying a holistic market-based approach and the Value Added approach, the relationship between IC value, as obtained by these two different approaches, is tested in relation to selected determinants from the extant literature.
Findings – The results show that in the Italian listed firm context, MtB is a better estimator of IC value than VAIC. Further, the results show for MtB that IA, profitability, leverage, growth and age are significant positive and determinants, while size is a significant negative determinant. For VAIC, the results show that only profitability and leverage are statistically significant positive and negative determinants, respectively, , while the other model variables are insignificant.
Research limitations/implications - The validity of the findings is somewhat limited to the Italian context, as the study focuses on a sample of companies listed on the Milan Stock Exchange, all of which prepare their individual financial statements according to IFRS. Further limitations are related to the use of only two alternative IC measurement approaches, along with their own limitations. The study allows academic researchers to compare the two different methods of measuring IC in order to find the most suitable IC measurement tool for other European contexts.
Practical implications - This paper also has implications for managers and practitioners. The findings suggest that managers should manage the risk that firm growth (an increase in firm size) could lead to a decrease in IC value, in the absence of a consistent IC-oriented investment strategy. In other words, managers should, avoid smoothing their IC investment as the company grows, in order to maintain a stable MTB ratio. Further, practitioners, such as financial analysts should be aware of the different ways of measuring performance, as the results show a high correlation between indicators such as VAIC and ROA. It is worth exploring, from a non-shareholder perspective, the many facets of corporate performance, in order to take account of wider stakeholders.
Originality/value – This paper contributes to the IC literature as it is the first study which compares two alternative IC measurement methods, Market to Book (MtB) and Value Added Intellectual Coefficient (VAIC), in order to find the most suitable method to capture IC value in an Italian context, and within the framework of IFRS. Moreover, it investigates the potential determinants of IC value calculated using the two methods.


Forte, W., Matonti, G., Tucker, J., & Nicolo, G. (2017, September). MtB versus VAIC in measuring intellectual capital: Empirical evidence from Italian listed companies. Paper presented at 13TH INTERDISCIPLINARY WORKSHOP ON INTANGIBLES AND INTELLECTUAL CAPITAL

Presentation Conference Type Conference Paper (unpublished)
Start Date Sep 21, 2017
End Date Sep 22, 2017
Acceptance Date Sep 19, 2017
Publication Date Sep 19, 2017
Print ISSN 2295-1679
Peer Reviewed Peer Reviewed
Keywords intellectual capital, intangible assets, market-to-book ratio, VAIC, Italian listed firms
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Additional Information Title of Conference or Conference Proceedings : 13th Interdisciplinary Workshop on Intangibles and Intellectual Capital Value Creation, Integrated Reporting and Governance, Ancona, Italy, September 21-22, 2017