The Intervening Role of Value Added Intellectual Capital on The Relationship between Corporate Governance and Firm Value

Saarce Elsye Hatane, Melinda Setiadi, Josua Tarigan

Abstract


The purpose of this research is to analyze the direct impact of board structures on intellectual capital and firm value. The intellectual capital has a role as the mediating variable between corporate governance and firm value. Corporate governance is indicated by board size, gender diversity, and managerial ownership. Intellectual capital and firm value are measured by VAICTM and Tobin’s Q approximation respectively. Specifically, this study is conducted in the consumer goods sector during 2010-2015 in Indonesia and Malaysia. Total samples gathered from Indonesia Stock Exchange and Bursa Malaysia are 25 Indonesia companies (150 firm-year) and 106 Malaysia companies (636 firm-year). Partial least square is applied in order to examine the research model. The findings support all the proposed hypothesis, that corporate governance in both Indonesia and Malaysia have a positive significant impact on intellectual capital and value. In both countries, intellectual capital also has a positive significant impact. However, the main driver of significance on intellectual capital is different. Furthermore, intellectual capital in Malaysia is successfully intervening in the relationship between board structures and firm value

Keywords


Board Structure; Firm Value; Intellectual Capital; Managerial Ownership

Full Text:

PDF

References


Abidin, Z.Z., Kamal, N.M. & Jusoff, K. (2009). Board structure and corporate performance in Malaysia. International Journal of Economics and Finance, 1(1), 150-164. https://doi.org/10.5539/ijef.v1n1p150

Aida, R. M., & Rahmawati, E. (2015). Pengaruh modal intelektual dan pengungkapannya terhadap nilai perusahaan: Efek intervening kinerja perusahaan. Journal of Accounting and Investment, 16(2), 96-109. https://doi.org/10.18196/jai.2015.0035.96-109

Al-Musali, M. A., & Ismail, K. N. (2015). Board diversity and intellectual capital performance. Accounting Research Journal, 28(3), 268 - 283. https://doi.org/10.1108/ARJ-01-2014-0006

Appuhami, R., & Bhuyan, M. (2015). Examining the influence of corporate governance on intellectual capital efficiency. Managerial Auditing Journal, 30(4/5), 347-372. https://doi.org/10.1108/MAJ-04-2014-1022

ASEAN. (2017). Home. Retrieved March 4, 2017, from ASEAN Economic Community: http://asean.org/asean-economic-community/#

Berzkalne, I., & Zelgalve, E. (2014). Intellectual capital and company value. Procedia Social and Behavioral Sciences, 110, 887-896. https://doi.org/10.1016/j.sbspro.2013.12.934

Bhatt, P. R. (2016). Corporate governance in Malaysia: has MCCG made a difference. International Journal of Law and Management, 58(4), 403-415. https://doi.org/10.1108/IJLMA-06-2015-0032

Bohdanowicz, L. (2014). Managerial ownership and intellectual capital efficiency; evidence from Poland. China-USA Business Review, 13(10): 626-635. https://doi.org/10.17265/1537-1514/2014.10.002

Carter, D. A., D’Souza, F., Simkins, B. J., & Simpson, W. G. (2010). The gender and ethnic diversity of US boards and board committees and firm financial performance. Corporate Governance, 18(5), 396-414. https://doi.org/10.1111/j.1467-8683. 2010.00809.x

Carter, D. A., Simkins, B. J., & Simpson, W. G. (2003). Corporate governance, board diversity and firm value. The Financial Review 38(1), 33-53. https://doi.org/10.1111/1540-6288.00034

Cerbioni, F., & Parbonetti, A. (2007). Exploring the effect of corporate governance on intellectual capital disclosure: an analysis of European biotechnology companies. European Accounting Review, 16(4), 791-826. https://doi.org/10.1080/09638180701707011

Chan, B. Y., & Cheung, S. Y. (2004). Corporate governance in Asia. Asia-Pacific Development Journal, 11(2), 1-32. https://doi.org/10.18356/c89f4feb-en

Clarke, M., Seng, D., & Whiting, R. (2011). Intellectual capital and firm performance in Australia. Journal of Intellectual Capital, 12(4), 505-530. https://doi.org/10.1108/14691931111181706

Cossin, D., Ong, B. H., & Coughlan, S. (2015). A practival perspective: stewardship fostering responsible long-term wealth creation. IMD Global Board Center, 1-40.

Darmadi, S. (2013). Do women in top management affect firm performance? Evidence from Indonesia. The International Journal of Business in Society, 13(3), 288-304. https://doi.org/10.1108/CG-12-2010-0096

Daryaee, A., Pakdel, A., Easapour, K., & khalaflu, M. M. (2011). Intellectual capital, corporate value and corporate governance: Evidence Tehran stock exchange. Australian Journal of Basic and Applied Sciences, 5(12), 821-826.

Davis, J. H., Schoorman, F. D., & Donaldson, L. (1997). Toward a stewardship theory of management. Academy of Management Review, 22(1), 20-47. https://doi.org/10.2307/259223

Deloitte. (2013, March). Women in the Boardroom: A Global Perspective.

Edwards, J. R., & Lambert L. S. (2007). Methods for integrating moderation and mediation: A general analytical framework using moderated path analysis. Psychological Methods, 12, 1-22. http//:dx.doi.org/10.1037/1082-989X.12.1.1.supp

Eisenhardt, K. M. (1989). Agency theory: an assessment and review. Academy of Management Review, 14(1), 57-74. https://doi.org/10.2307/258191

Filatotchev, I., & Nakajima, C. (2010). Internal and external corporate governance: an interface between an organization and its environment. British Journal of Management, 21(3), 591-606. http://dx.doi.org/10.1111/j.1467-8551.2010.00712.x

GBGIndonesia. (2013). Manufacturing. Retrieved from: http://www.gbgindonesia.com/en/manufacturing/article/2013/indonesia_s_fast_moving_consumer_goods_fmcg_sector.php

Haan, J. D. (2016). Indonesia and Malaysia: prospects for closer co-operation. Strategic Analysis Paper.

Hayes, A. F. (2013). Introduction to mediation, moderation, and conditional process analysis: A regression-based approach. New York: Guilford Press.

Hidalgo, R. L., García-Meca, E., & Martinez, I. (2011). Corporate governance and intellectual capital disclosure. Journal of Business Ethics, 100(3), 483-495. https://doi.org/10.1007/s10551-010-0692-x

Hidayat, S. (2016, February 23). Manufacturing Industry. Retrieved from: https://www.indonesia-investments.com/news/todays-headlines/manufacturing-industry-indonesia-contributes-18.1-to-gdp/item6527?

Ho, C. A., & Williams, S. M. (2003). International comparative analysis of the association between board structure and the efficiency of value added by a firm from its physical capital and intellectual capital resources. The International Journal of Accounting, 38(4), 465-491. https://doi.org/10.1016/j.intacc.2003.09.001

Hooi, L. W. (2016). The manufacturing sector in Malaysia. In Organisational Justice and Citizenship Behaviour in Malaysia (pp. 20-36). Singapore: Springer Science.

Horváth, R., & Spirollari, P. (2012). Do the board of directors's characteristics influence firm's performance? The U.S Evidence. Prague Economic Paper, 2012(4), 470-486. https://doi.org/10.18267/j.pep.435

Iazzolino, G., & Laise, D. (2013). Value added intellectual coefficient (VAIC): A methodological and critical review. Journal of Intellectual Capital, 14(4), 547-563. https://doi.org/10.1108/JIC-12-2012-0107

IFC & OJK. (2014). The Indonesia Corporate Governance Manual, First Edition.

Isidro, H., & Sobral, M. (2015). The effects of women on corporate boards on firm value, financial performance, and ethical and social compliance. Journal Business Ethics, 132(1), 1-19. https://doi.org/10.1007/s10551-014-2302-9

Jenkins, M., Ambrosini, V., & Collier, N. (2016). Advanced Strategic Management (A Multi Perspective Approach). New York: Palgrave.

Jurczak, J. (2008). Intellectual capital measurement method. Economic and Organization, 1(1), 37-45. https://doi.org/10.2478/v10061-008-0005-y

Kamardin, H. (2014). Managerial ownership and firm performance: the influence of family directors and non-family directros. Ethics, Governance and Corporate Crime, 6(6), 47-83. https://doi.org/10.1108/S2043-052320140000006002

Kamardin, H., & Haron, H. (2011). Internal corporate governance and board performance in monitoring roles. Journal of Financial Reporting and Accounting, 9(2), 119-140. https://doi.org/10.1108/19852511111173095

Keenan, J., & Aggestam, M. (2001). Corporate governance and intellectual capital: Some conceptualisations. Corporate Governance, 9(4), 259-275. https://doi.org/10.1111/1467-8683.00254

Kılıç, M., & Kuzey, C. (2016). The effect of board gender diversity on firm performance: Evidence from Turkey. Gender in Management: An International Journal, 31(7), 434-455. https://doi.org/10.1108/GM-10-2015-0088

KNKG. (2006). Pedoman Umum Good Corporate Governance Indonesia.

Kusnadi, Y., & Mak, Y. T. (2005). Size Really Matters: Further evidence on a negative relationship between board size and firm value. Pacific Basin International Journal, 13(3), 301-318. https://doi.org/10.2139/ssrn.303505

Kweh, Q. L., Chan, Y. C., & Ting, I. W. (2013). Measuring intellectual capital efficiency in the Malaysian software sector. Journal of Intellectual Capital, 14(2), 310-324. https://doi.org/10.1108/14691931311323904

L’Huillier, B. M. (2014). What does "corporate governance" actually mean? Corporate Governance: The international journal of business in society, 14(3), 300-319. https://doi.org/10.1108/cg-10-2012-0073

La Porta, R., López-de-Silanes, F., Shleifer, A. & Vishny, R. (1998). Law and Finance. Journal of Political Economy, 106(6), 1113-1155. https://doi.org/10.1086/250042

Liang, C. J., Huang, T. T., & Lin, W. C. (2011). Does ownership structure affect firm value? Intellectual capital across industries perspective. Journal of Intellectual Capital, 12(4), 552-570. https://doi.org/10.1108/14691931111181724

Maditinos, D., Chatzoudes, D., Tsairidis, C., & Theriou, G. (2011). The impact of intellectual capital on firms' market value and financial perfromance. Journal of Intellectual Capital, 12(1), 132-151. https://doi.org/10.1108/14691931111097944

Makki, M. A., & Lodhi, S. A. (2014). Impact of corporate governance on intellectual capital efficiency and financial performance. Pakistan Journal of Commerce and Social Sciences, 8(2), 305 - 330.

Malik, M. S., & Makhdoom, D. D. (2016). Does corporate governance beget firm performance in Fortune Global 500 companies? Corporate Governance: The international journal of business in society, 14(4), 747-764. https://doi.org/10.1108/CG-12-2015-0156

McKinsey. (2012). Women Matter: An Asian Perspective (Harnessing female talent to raise corporate performance). McKinsey & Company.

Mitchell, W. S. (2000). Association between gender and colour diversity of board structure on the intellectual capital performance of publicly - 104 - listed companies from an emerging economy: Evidence from South Africa. Working Paper, University of Calgary, Canada.

Munandar, H. (2017, February 14). Manfacturing Industry. Retrieved from: https://www.indonesia-investments.com/news/todays-headlines/manufacturing-sector-indonesia-absorbs-16.3-million-workers/item7614?

Nadarajan, S., Chandren, S., Bahaudinb, A. Y., Elias, E., & Halim, M. (2016). Corporate governance: board size, managerial ownership and operational performance. International Soft Science Conference, 42(2), 184-188. https://doi.org/10.15405/epsbs.2016.08.27

Nam, S. W., & Nam, I. C. (2004). Corporate Governance In Asia. Asian Development Bank Institute.

Nimtrakoon, S. (2015). The relationship between intellectual capital, firms' market value and fiancial performance: Empirical evidence from ASEAN. Journal of Intellectual Capital, 16(3), 587-618. https://doi.org/10.1108/JIC-09-2014-0104

Nkundabanyanga, S. K., Ntayi, J. M., Ahiauzu, A., & Sejjaaka, S. K. (2014). Intellectual capital in Ugandan service firms as mediator of board governance and firm performance. African Journal of Economic and Management Studies, 5(3), 300-340. https://doi.org/10.1108/AJEMS-06-2012-0041

Noradiva, H., Parastou, A., & Azlina, A. (2016). The effects of managerial ownership on the relationship between intellectual capital performance and firm value. International Journal of Social Science and Humanity 6(7), 514-518. https://doi.org/10.7763/ijssh.2016.v6.702

Ntim, C., Opong, K., & Danbolt , J. (2015). Board size, corporate regulations and firm valuation in an emerging market: A simultaneous equation approach. International Review of Applied Economics, 29(2), 194-220. https://doi.org/10.1080/02692171.2014.983048

Nuryaman. (2015). The influence of intellectual capital on the firm’s value with the financial performance as intervening variable. Procedia Social and Behaviour Sciences, 211, 292-298. DOI: https://doi.org/10.1016/j.sbspro.2015.11.037

Oba, V. C., Ibikunle, J., & Damagum, Y. M. (2013). The impact of board mechanism on intellectual capital disclosures in Nigeria. Journal of Accounting and Management, 3(1), 65-80.

OECD. (2010). OECD Science, Technology and Industry Outlook 2010. Science and Innovation: Indonesia, 188-189.

Pangestu, A. D., & Wijaya, R. E. (2014). Pengaruh intellectual capital terhadap market value dan kinerja keuangan. Journal of Accounting and Investment, 15(2), 90-100.

Park, K., & Jang, S. (2010). Insider ownership and firm performance: An examination of restaurant firms. International Journal of Hospitality Management, 29(3), 448-458. https://doi.org/10.1016/j.ijhm.2009.10.023

Pastoriza, D., & Ariño, M. A. (2008). When Agents Become Stewards: Introducing Learning in the Stewardship Theory. 1st IESE Conference, 1-16. https://doi.org/10.2139/ssrn.1295320

Prihatiningtyas, Y. W. (2012). Gender Diversity on the Boardroom and Firm Performance: Evidence from Indonesian Publicly Listed Financial Firms. Thesis. University of Canberra, Australia.

Pulic, A. (2000). VAIC™ – An accounting tool for IC Management. International Journal Technology Management, 20(5), 702-714. https://doi.org/10.1504/ijtm.2000.002891

Putri, A. (2016, April 13-26). Rahasia Sukses Bos-Bos Wanita Pilihan. SWA Magazine 08 XXXIII, 22-27. Jakarta, Indonesia: PT. Swasembada Media Bisnis.

PWC. (2015). 2015-16 Outlook for the Retail and Consumer Products Sector in Asia.

PWC. (2016). The Swinging Pendulum: Board Governance in the Age of Shareholder Empowerment. Governance Insights Center.

Ramadania, Gunawan, S., & Rustam, M. (2015). Cultural similarity, consumer ethnocentrism and product necessity in evaluation of Malaysian product: Indonesia Consumer Perspective. Social and Behavioral Sciences, 211, 533-540. https://doi.org/10.1016/j.sbspro.2015.11.071

Ruan, W., Tain, G., & Ma, S. (2011). Managerial ownership, capital structure and firm value: Evidence from China's civilian-run firms. Australian Accounting, Business and Finance Journal, 5(3), 73-93. https://doi.org/10.22495/cocv7i2p6

Saleh, N. M., Hassan, M. S., & Ridhuan, M. (2009). Ownership structure and intellectual capital performance in Malaysia. Asian Academy of Management Journal of Accounting and Finance, 5(1), 1-29.

Shahriar, A., Samuel, F. W., & Saif, D. (2017). Why pls-sem is suitable for complex modeling? An empirical illustration in big data analytics quality. Production Planning & Control, 28(11-12),1011-1021. https://doi.org/10.1080/09537287.2016.1267411

Shamsuddin, A., Mun, C. Y., Ahmad Danial, N. A., Yusn, N. S., Mohd Adham, N., & Mat Din, N. A. (2017). The Influence of Intellectal Capital Toward Corporate Governance Practice in Top 100 ASEAN Companies. International Journal of Business, Economics and Law 13(1): 55-64.

Soebiantoro, U., & Sujoko. (2007). Pengaruh struktur kepemilikan saham, leverage, faktor intern dan faktor ekstern terhadap nilai perusahaan. Journal Management dan Kewirausahaan, 9(1), 41-48.

Souster, R. (2012). Corporate Governance: The board of diretors and standing committees. ACCA - Technical Article.

Susanti, L., & Nidar, S. R. (2016). Corporate board and firm value: perspective two-tier board system in Indonesia. International Journal of Scientific & Technology Research, 5(05), 300-305.

Svanadze, S., & Kowalewska, M. (2015). The measurement of intellectual capital by VAIC Model - example of WIG20. Journal of Applied Knowledge Management, 3(2), 36-44.

Swartz, N.-P., & Firer, S. (2005). Board structure and intellectual capital performance in South Africa. Meditari Accountancy Research, 13(2), 145-166. https://doi.org/10.1108/10222529200500017

Tanideh, S. (2013). Relationship between innovation capital and intellectual capital with value and financial performance. Life Science Journal, 10(10s), 251-254.

Wang, J. C. (2008). Investigating Market Value and Intellectual Capital for S&P 500. Journal of Intellectual Capital, 9(4), 546-563. https://doi.org/10.1108/14691930810913159

Yaakub, A. N. (2009). Malaysia and Indonesia: A Study of foreign Policies with Special Reference to Bilateral Relations. Thesis for the Degree of Doctor of Philosophy (Arts). The University of Western Australia.

Zabri, S. M., Ahmad, K., & Wah, K. K. (2016). Corporate governance practices and firm performance: Evidence from Top 100 public listed companies in Malaysia. Procedia Economics and Finance, 35, 287-296. https://doi.org/10.1016/s2212-5671(16)00036-8




DOI: https://doi.org/10.18196/jai.2003125

Refbacks

  • There are currently no refbacks.


Bookmark and Share


Office:
Ruang Jurnal Fakultas Ekonomi dan Bisnis UMY
Gedung Ki Bagus Hadikusuma (E4) Lantai 2, Kampus Terpadu Universitas Muhammadiyah Yogyakarta,
Jalan Brawijaya (Lingkar Selatan), Tamantirto, Kasihan, Bantul, Daerah Istimewa Yogyakarta, Indonesia, 55183
Website: journal.umy.ac.id/index.php/ai - E-mail: jai@umy.ac.id

Journal of Accounting and Investment is licensed under Creative Commons Attribution Attribution-NonCommercial-NoDerivatives 4.0 International License

View My Stats