The Impact of Intellectual Capital and Its Components on Firms' Market Value: A Comparative Study Based On Manufacturing and Service Sectors in Sri Lanka

Abstract

This comparative study attempts to identify the impact of intellectual capital and its components on firms? market value in manufacturing sector and service sector in Sri Lanka. The study was based on 52 public listed companies (PLCs) in two sectors in Colombo Stock Exchange (CSE) and the annual reports of PLCs from 2005 to 2009 were employed to collect the data. Value Added Intellectual Coefficient (VAICTM) and its 3 components, developed by Ante Public (1998) were utilized to measure the intellectual capital efficiency, whilst Market-to-Book Value Ratio (M/B) measured the market value. The findings revealed that, intellectual capital does not affect to the market value of PLCs in both sectors and they are consistent with Chan (2009) and Firer and Stainbank (2003). Physical capital plays a significant role in market value in service sector and it is consistent with Chan (2009), Chen et al. (2005), and Najibullah (2005).