Intellectual capital - - A determinant of market value volatility

Abstract

The issue of intellectual capital has very much been in the spotlight as of late. Intellectual capital can be defined as the soft assets that cannot be found on a balance sheet but certainly has an impact on future success or failure. Even though the importance of intellectual capital has been recognized much can be said about the disclosure of these assets. Starting in the late 1980s a few models have been developed in order to capture and visualize a company's intellectual capital but there are no standards, leaving it up to the companies themselves to decide how to present their hidden assets.

In this thesis an attempt has been made to, based on a few theoretical paradigms, construct a model that can be used to rate a company's intellectual capital using publicly available information only. The question has been whether or not transparency has an impact on market value volatility. After analyzing a number of IT/Internet-consultants we have come to the conclusion that transparency may have an impact on market value volatility. The relationship between transparency and volatility found in this thesis is, considering the data, rather strong but needs to be verified through further research before it can be definitely established.