Proceedings of the 3rd European Conference on Intellectual Capital

Nellija Titova
Employee productivity (EP) is a measure for <strong>the</strong> net value added per employee, reflecting
employees‟ productivity: (EP) = pre- tax income / number <strong>of</strong> employees;
Operating Cash Flow Ratio (OCF) is <strong>the</strong> net cash generated from operations. It is produced by
taking net income, adding back <strong>the</strong> amount <strong>of</strong> depreciation, and making adjustments to reflect
changes in <strong>the</strong> working capital accounts, i.e. receivables, payables, inventories and o<strong>the</strong>r current
accounts, on <strong>the</strong> balance sheet. Operating cash flow is debatably a better measure <strong>of</strong> a
business's pr<strong>of</strong>its than earnings because a company can show positive net income on <strong>the</strong> income
statement and still not be able to pay its liabilities. OCF = Total Operating Cash Flow/ Total
Assets;
Barriers to entry (BE): it can be argued that firms that are protected from competition in <strong>the</strong>ir
sector by heavy barriers to entry are less more likely to encourage and motivate <strong>the</strong>ir staff to
generate innovation and this situation might have a negative impact on <strong>the</strong> performance <strong>of</strong> <strong>the</strong>
staff (human capital). There are several ways <strong>of</strong> measuring obstacles to entry in <strong>the</strong> banking
literature, e.g. BE = ratio <strong>of</strong> fixed assets/ total assets;
The ratio <strong>of</strong> staff cost to total revenue for <strong>the</strong> bank i in year t will be used to represent <strong>the</strong>
efficiency <strong>of</strong> investment in human capital (SC);
Bank risk is measured as <strong>the</strong> ratio <strong>of</strong> intangible assets to total assets <strong>of</strong> banks i in year t (BR);
R&D expenditures (RD) and advertising expenditures (AD). Besides <strong>the</strong> three VA efficiency
indicators, we also include R&D and advertising expenditures to proxy for innovative and
relational capital.
RD = R&D expenditures / book value <strong>of</strong> common stocks
AD = Advertising expenses / book value <strong>of</strong> common stocks:
Special care was taken with inserting controlling variables for purposes <strong>of</strong> trying to isolate <strong>the</strong> IC
effect from o<strong>the</strong>r factors linked to tangible and financial assets <strong>of</strong> companies. (Ricieri. F. 2007),
(Anggreni T. 2008) (Size <strong>of</strong> <strong>the</strong> firm, Debt-to-equity ratio (leverage), ROE, and Industry Type).
4. The results
4.1 General common findings
There is significant positive relationship between IC and financial performance;
Pulic proposes <strong>the</strong> VAIC as an aggregate, standardized measure <strong>of</strong> corporate intellectual ability,
but empirical results indicate that <strong>the</strong> three components <strong>of</strong> VAIC have substantial higher
explanatory power for firm market value than does <strong>the</strong> aggregate measure <strong>of</strong> VAIC;
Results from <strong>the</strong> studies revealed significant differences in bank/enterprise ranking based on
efficiency and traditional accounting measures. For example, „Comparison between VAIC ranking
and shareholders‟ equity ranking again proves that mere higher equity does not connote a
healthier position <strong>of</strong> a bank in this competitive market; ra<strong>the</strong>r, it is <strong>the</strong> utilization <strong>of</strong> <strong>the</strong> fund that
has influential impact on <strong>the</strong> performance <strong>of</strong> <strong>the</strong> bank” (Mohhobot A. 2008);
4.2 General unique findings
Finnish research (Kujansivu, 2007) indicates that, for example, <strong>the</strong> IC efficiency (sum <strong>of</strong> Human
and Structural capital efficiencies) <strong>of</strong> companies representing electricity, gas and water supply is
mainly due to <strong>the</strong> efficient utilization <strong>of</strong> human capital employed. At <strong>the</strong> same time, <strong>the</strong> IC
efficiency <strong>of</strong> business services companies for example is mostly due to <strong>the</strong> structural capital
efficiency. O<strong>the</strong>r utilize both <strong>the</strong>ir IC-related resources almost equally;
The same research (Kujansivu, 2007) states that in many industries <strong>the</strong> total efficiency <strong>of</strong> value
creation from all resources employed is higher in small and medium-sized enterprises than that in
larger companies. Instead, in <strong>the</strong> chemical industry, <strong>the</strong> electricity, gas and water supply industry
and in <strong>the</strong> transportation, storage and telecommunication sector <strong>the</strong> efficiency is higher in large
companies;
Bangladesh (Mohhobot, 2008) and Indian (Barahti, 2007) group <strong>of</strong> researches have also
evaluated <strong>the</strong> efficiency <strong>of</strong> use <strong>of</strong> IC comparing foreign and domestic banks. The results are
controversial. Bangladesh domestic banks are more efficient than <strong>the</strong> foreign banks and are
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