Intellectual Capital’s Leverage on Market Value
Abstract: The purpose of this thesis is to visualize whether there is a correlation between the intellectual capital and the market value among Swedish companies, listed on the Stockholm stock exchange. The purpose is furthermore to enlighten if there are factors that might alter the strength of this correlation. By using these results the aim is to further examine a possible indicator for leveraging the efficiency of intellectual capital. In order to perform this investigation, intellectual capital and market value are quantified with, respectively, value added per employee and stock exchange value per employee. These measurements are gathered for 40 Swedish companies listed on the Stockholm stock exchange, divided into four industry sectors, Industrials, Life science, Real estate and construction and IT consulting and services, and tested statistically in order to find a linear pattern. The companies have also been divided by company size and age. What this thesis visualizes is that there generally is a correlation between value added per employee and stock exchange value per employee, and therefore, according to our approximation on the return on intellectual capital, also between intellectual capital and market value. It further proves that there also are substantial differences between the different industry sectors, both regarding the correlation between intellectual capital and market value and regarding the leverage effect an increase in intellectual capital has on market value. In order to provide an indicator for improving companies’ intellectual capital, a statistical examination concerning the relationship between the IC Multiplier and value added is also performed. This examination shows that there is a strong correlation between the IC Multiplier and value added, and that working with the ratio between structural and human capital is an excellent method for companies to increase there intellectual capital. In conclusion it can be said that most companies in this investigation show very poor values regarding the IC Multiplier, leading to an erosion of the companies’ human capital. In order to become more stable and lower the degree of risk, these companies must improve their IC Multiplier. What this thesis demonstrates is that an improvement of the IC Multiplier also will have an extensive effect on the company’s market value.
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