Extended Value-Added Intellectual Coefficient and Financial Reporting Quality: Moderating Role of Global Financial Crisis

Abstract

Besides traditional approaches, this study aimed to construct and validate the new model of intellectual capital and financial reporting quality and created a deeper and better understanding through the use of rigorous secondary data. It adopted new formula of intellectual capital instead of traditional primary measures and explored the role of financial reporting quality in financial success of firms. Study is helpful for decision makers, especially from the manufacturing sector, to mould their practices accordingly and they will also realize the importance of high financial reporting quality. The study used Three-stage least squares regression analysis to investigate the relationship between variables. Extended Value-Added Intellectual Coefficient method is used to measure intellectual capital and discretionary revenues method is used to measure financial reporting quality. Panel data was collected from 50 firms, included in fortune global 500 companies list from 2007 to 2017. Findings disclosed that intellectual capital and process capital has a significant impact on financial performance. Human capital and relational capital negatively influence however, innovation capital and financial reporting quality positively influence financial performance. Global Financial Crisis positively moderates the effect of intellectual capital on financial performance but it doesn’t moderate the effect of financial reporting quality on financial performance.

Keywords: Financial Reporting Quality, Intellectual Capital, Global Financial Crisis, Financial Performance, Three-stage least squares regression

DOI: 10.7176/RJFA/10-10-12

Publication date:May 31^st 2019