Review Article Open Access

Does Intellectual Capital Affect the Volatility of Returns? An Empirical Investigation on Italian Listed Companies

Brett W. Cantrell1, Daniela Coluccia2, Stefano Fontana2 and Silvia Solimene2
  • 1 E.H. Patterson School of Accountancy, University of Mississippi, United States
  • 2 University of Rome Sapienza, Rome, Italy

Abstract

In modern information economies, economic success increasingly depends on the ability to apply knowledge and to transform it into firm value. While intellectual capital plays a critical role in firm success, it is an intangible asset that is difficult to measure and that is unrecorded by the firm. Difficulties in measuring intellectual capital, as well as the dynamic nature of the firms that rely on it, may lead to greater stock market volatility/risk. Consistent with this expectation, in statistical tests we find that intellectual capital, measured by VAIC, positively relates to the volatility of stock returns section among Italian listed companies. We find this positive relation for two components of a firm’s risk: systematic risk and specific risk. The finding is relevant to both investors concerned with understanding the risk/reward balance of particular investments and regulators concerned with market stability.

American Journal of Applied Sciences
Volume 14 No. 12, 2017, 1209-1219

DOI: https://doi.org/10.3844/ajassp.2017.1209.1219

Submitted On: 21 November 2017 Published On: 10 January 2018

How to Cite: Cantrell, B. W., Coluccia, D., Fontana, S. & Solimene, S. (2017). Does Intellectual Capital Affect the Volatility of Returns? An Empirical Investigation on Italian Listed Companies. American Journal of Applied Sciences, 14(12), 1209-1219. https://doi.org/10.3844/ajassp.2017.1209.1219

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Keywords

  • Intellectual Capital
  • VAIC
  • Stock Price Volatility
  • Systematic Risk
  • Idiosyncratic Risk
  • Financial Markets