Tag Archives: Corporate Valuation

Effect of Intellectual Capital on Corporate Valuation of Quoted Pharmaceutical Firms in Nigeria (Published)

This study examined the effect Intellectual Capital(IC) can affect corporate valuation of firms quoted in Nigeria. The study adopted the Panel Research Design as used Time Series and Cross-Sectional Data. Data covered a ten- year period (2004-2013). Simple Random Sampling was employed in selecting firms for this study.   Data were sourced from the firms’ annual financial statements using content analysis approach. Market valuation data were sourced from the Nigerian Stock Exchange. Intellectual Capital(Independent Variable) was measured using Human Capital Efficiency (HCE), Structural Capital  Eficiency(SCE) and Capital Employed Efficiency (CEE). Market to Book Value Ratio(M/BV) and  Earnings per Share(EPS). The study adopted the Value Added Intellectual Coefficient (VAIC) Model as developed by Pulic(1998) to examine the effect of  Intellectual Capital on  firms’ values. Multiple Regression Correlation Analysis was used on the data at 5% level of significance. E-View Statistical Tool version 8.0  was used in the analysis. The results reveal that Human Capital Efficiency has a positive and significant effect on Market/Book Value. SCE has a negative and insignificant effect on M/BV; CEE has negative and significant effect on M/BV; positive and insignificant effect on EPS. In view of our findings, the study recommends that companies should invest substantial part of their earnings on human capital via knowledge development as such investments are capable of stimulating the value creation potentials of their staff and can get investors  place higher premium on them.

Keywords: Corporate Valuation, Intellectual Capital, Nigeria, Pharmaceutical Firms


This study examines the Impact of Human Capital Accounting(HCA) on financial performance and market valuation using four publicly quoted companies(banks) in Nigeria. It presents a comparative analysis between the current accounting practice of corporate valuation(net worth) and what it should be if investments on human capital are treated as assets, capitalised and amortized over the useful life span of the assets. Data for this study were sourced through questionnaire which were administered to a randomly selected respondents of accountants of management cadre. Secondary data were sourced from the annual financial statements of five selected firms, relevant textbooks and the internet. Data were analysed using percentages and Chi-Square statistical test. The study reveals among others that there is a significant increase in firms’ networth when investments on human capital are treated as assets and capitalized as against the current practice where such expenditures are treated as mere revenue expenses thereby leading to gross undervaluation of firms’ Statement of Financial Position(Balance Sheet) and the Income Statement (Profit and Loss Account). The study recommends that investment in human capital should be treated as asset and so amortised over the expected period of service while the current practice of writing-off the annual investment on human capital from the the year’s income statement should be discouraged as the practice grossly undervalues firms. Relevant regulatory bodies such as Financial Reporting Council of Nigeria, SEC, CBN, NDIC and so on are implored to make laws that will compel quoted firms to compulsorily integrate HCA in their financial reports.

Keywords: : Human Capital, Corporate Valuation, Financial reports, Human Assets, Human Capital Accounting