An Indonesian Empirical Study of The Relationship between Firm’s Intellectual Capital, Financial Performance and Market Value

Abstract

The purpose of this study is to explain the effect of Intellectual Capital on the company’s financial performance and market value. The population used in this study are all large trasing subsector companies listed on the Indonesia Stock Exchange during the 2009-2018 studi period. The sampling technique in this study uses a purposive sampling technique that uses criteria that have been determined by researches in order to obtain a sample of 13 companies. The testing tool used is Partial Least Square (PLS) version 2.0. The result of this study indicate that there is a positive and significant influence of intellectual capital on the company’s financial performance and intellectual capital also has a positive and significant on the company’s market value.The suggestion in this research is companie wish to consider the use of intellectual capital to improve financial performance and market value of the company.

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“…The results of this study are in line with research conducted by several researchers such as (Cahyaningrum & Atahau, 2020), which stated that intellectual capital does not affect financial performance. This research is not in line with several studies that have also been conducted, including: (Janosevic & Dzenopoljac, 2011), (Suseno et al, 2019), (Silviani & Noekent, 2020), (Hidayah et al, 2020), (Yusuf et al, 2020), (Gama et al, 2020), (Azzahra, 2020), (Jordão & de Almeida, 2017), (Yurianda & Masdupi, 2020), (R. Muhammad et al, 2021), (Khasanah, 2016), which states that intellectual capital can improve the company's financial performance.…”

“…Similar statements were also expressed by several researchers regarding the relationship between intellectual capital and financial performance as expressed by: (Ongkorahardjo et al, 2008), (Santoso, 2011), (W & Firmansyah, 2012), (Gozali & Hatane, 2014), (Gozali & Hatane, 2014), (Sirojudin, Gatot Ahmad; Nazaruddin, 2014), (Agustina et al, 2015), (Habibah & Riharjo, 2016), (Dženopoljac et al, 2016), (H. S. , (Cahyono & Qomariah, 2017), (Sumani & Suryaningsih, 2020). Several other studies that also link intellectual capital issues with company financial performance and state that intellectual capital can improve the company's financial performance if it is managed properly, including: (Janosevic & Dzenopoljac, 2011), (Jordão & de Almeida, 2017), (Suseno et al, 2019), (Yusuf et al, 2020), (Gama et al, 2020), (Silviani & Noekent, 2020), (Azzahra, 2020), (Yurianda & Masdupi, 2020), (Hidayah et al, 2020), (R. Muhammad et al, 2021). Based on theory and empirical studies that have been conducted by several researchers, the second hypothesis in this study is H2: intellectual capital has an influence on the company's financial performance.…”