The intellectual capital multiple: a new tool for relative valuation of a firm - theoretical presentation and empirical application to Italian companies
by Gianpaolo Iazzolino; Giuseppe Migliano
International Journal of Intelligent Enterprise (IJIE), Vol. 2, No. 2/3, 2014

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.

Online publication date: Wed, 14-Jan-2015

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