Measuring the intellectual capital of Italian listed companies

William Forte, Jon Tucker, Gaetano Matonti, Giuseppe Nicolò

Research output: Contribution to journalArticlepeer-review

67 Citations (Scopus)
126 Downloads (Pure)


Purpose: The purpose of this paper is to investigate the relationship between intellectual capital (IC), measured in terms of the market to book (MTB) ratio, and potential key determinants of IC value such as intangible assets (IA) and a range of other factors. Design/methodology/approach: The study is conducted for a sample of 140 Italian corporations over the period 2009-2013. Applying a holistic market-based approach, the relationship between IC value and selected determinants from the extant literature is tested. Five hypotheses are tested using a pooled OLS regression model, while controlling for time. ROE is employed as a useful firm profitability indicator from the perspective of an equity investor. Moreover, four robustness tests are undertaken. Findings: The results show that IA, profitability, leverage, industry type, auditor type, and family ownership positively affect IC value, whereas SIZE and AGE negatively affect IC value. Moreover, the findings of the robustness tests suggest that all firms, and not just knowledge-intensive business service industry firms, manage knowledge. Research limitations/implications: The validity of the findings is 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 market value in the short term, as it is influenced by market volatility. The study may allow academic researchers to investigate the impact of other non-accounting sources of information on market value within a multidisciplinary perspective. Practical implications: This paper also has implications for managers and practitioners. The findings suggest that managers should not take for granted that firm growth (an increase in SIZE) alone will lead to an increase in IC value, in the absence of a consistent IC-oriented investment strategy. Managers should also avoid smoothing their IC investment as the company grows, in order to maintain a stable MTB ratio. Further, standard setters should seek to explore better means of disclosing non-accounting information relating to IC value. Originality/value: This paper contributes to the IC literature as it is the first study which applies the market capitalization approach to analyze IC value determinants in the Italian context, within the framework of IFRS. The findings reveal some interesting relationships between the MTB ratio and recognized intangible investments, which are found to be insignificant in previous studies, confirming that, through the holistic effect, the MTB ratio may be a good proxy for IC.

Original languageEnglish
Pages (from-to)710-732
Number of pages23
JournalJournal of Intellectual Capital
Issue number4
Publication statusPublished - 1 Jan 2017
Externally publishedYes


  • Intangible assets
  • Intellectual capital
  • Italy
  • Listed companies
  • Market to book ratio

ASJC Scopus subject areas

  • Education
  • Business, Management and Accounting(all)


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