Polyphenols: Functional Chemicals Based on Their Chemical Reactions, from Antioxidation to Inter-Substance Reactions

Abstract

Access to this document was granted through an Emerald subscription provided by emerald-srm:434496 [] For Authors If you would like to write for this, or any other Emerald publication, then please use our Emerald for Authors service information about how to choose which publication to write for and submission guidelines are available for all. Please visit www.emeraldinsight.com/authors for more information. About Emerald www.emeraldinsight.com Emerald is a global publisher linking research and practice to the benefit of society. The company manages a portfolio of more than 290 journals and over 2,350 books and book series volumes, as well as providing an extensive range of online products and additional customer resources and services. Abstract Purpose – The purpose of this paper is to explore whether intellectual capital affects the probability that a particular firm will default. The authors also test whether including intellectual capital performance in bankruptcy prediction models improves their predictive ability. Design/methodology/approach – Using a sample of US public companies from the period stretching from 1985 to 2015, the authors test whether intellectual capital performance reduces the probability of bankruptcy. The authors use the VAIC as an aggregate measure of corporate intellectual capital performance. Findings – The findings show that the intellectual capital performance is negatively associated with the probability of default. The findings also indicate that the bankruptcy prediction models that include intellectual capital have a superior predictive ability over the standard models. Research limitations/implications – This paper contributes to prior research on intellectual capital and firm performance. To the best of the knowledge, this is the first study to show that the benefits of intellectual capital extend from superior performance to long-term financial stability. The research can also contribute to bankruptcy studies. By using a time frame covering decades, the findings suggest that intellectual capital performance measures can be included in bankruptcy prediction models and can effectively complement traditional performance measures. Originality/value – This paper highlights that intellectual capital is associated with long-term financial stability and a lower bankruptcy risk. Firms realising the potential of their intellectual capital can produce a virtuous circle between higher performance and greater financial stability. 1. Introduction This paper explores whether a firm's intellectual capital performance reduces the probability of default and can help to predict bankruptcy. In a knowledge-based economy, intellectual capital plays a crucial role when it comes to increasing a firm's competitiveness and performance (Lev, 2000; Seetharaman et al., 2002; Massaro et al., 2015). Several studies show that intellectual capital has a positive impact on a firm's financial performance and market value and that they could be considered an indicator of future financial performance (e.g. Bontis, 1998; Pew Tan et al., 2007; Cabrita and Bontis, 2008; Zéghal and Maaloul, 2010; Clarke et al., 2011; Dženopoljac et al., 2016). Recent research suggests that intellectual capital can also have a relevant impact on a firm's long-term financial health and credit rating (Guimón, 2005). In this respect, bankruptcy studies acknowledge but do not investigate the relevance of intellectual capital. Most of the accounting-based bankruptcy prediction models have not been changed since decades. Recent studies suggest that these models can be improved to properly take into account the intellectual capital, which is crucial to nowadays economy (Beaver et al., 2005; Lev and Gu, 2016). Nonetheless, to the best of the authors' knowledge, no prior studies have investigated whether intellectual capital affects a firm's long-term financial stability or its probability of default. This paper aims to fill this research gap. Filling this gap through this investigation is relevant in the management's perspective. Proper management of intellectual capital could help firms to achieve a higher credit rating, lower the cost of debt, boost performance and increase market value (Dumay and Tull, 2007).