Title: The intellectual capital multiple: a new tool for relative valuation of a firm - theoretical presentation and empirical application to Italian companies

Authors: Gianpaolo Iazzolino; Giuseppe Migliano

Addresses: Department of Mechanical, Energy and Management Engineering, University of Calabria, Via Pietro Bucci 46/C, 87036 Rende, Cosenza, Italy ' Department of Mechanical, Energy and Management Engineering, University of Calabria, Via Pietro Bucci 46/C, 87036 Rende, Cosenza, Italy

Abstract: This paper proposes a new multiple, based on intellectual capital, as a new tool for relative valuation of a firm. The intellectual capital multiple (ICM), also disaggregated in three multiples, based on the intellectual capital components (human, structural and relational capital), can be added to the traditional financial-based multiples (e.g., price/earnings, EV/EBITDA, EV/sales, etc.) to improve the techniques of valuation based on the so-called comparables. An empirical analysis on a sample of firms listed in the Italian Stock Exchange has been carried out to validate the new method, by comparing the intellectual capital-based multiples with the traditional financial-based enterprise multiples. Findings show that, especially in certain sectors mainly characterised by a high use of intellectual capital resources (software and telecommunications), ICMs can be considered as valid and reliable. The ICMs can lead researchers and practitioners towards discovering a new 'intangible' valuation tool to be placed alongside 'tangible' valuation methods.

Keywords: intellectual capital; human capital; structural capital; relational capital; multiples; relative valuation; firm value; Italy; intangibles.

DOI: 10.1504/IJIE.2014.066674

International Journal of Intelligent Enterprise, 2014 Vol.2 No.2/3, pp.142 - 168

Received: 04 Jan 2014
Accepted: 16 Sep 2014
Published online: 14 Jan 2015 *

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