The Effect of Intellectual Capital on Cost of Finance and Firm Value

(Corresponding author) Abstract In today's knowledge-based industry, the role of intellectual capitals in creating value for the business units is more effective than financial capitals. The accounting system plays a crucial role in finding appropriate strategies for achieving suitable methods of evaluating intellectual capitals. One of the most significant shortcomings of traditional accounting systems is that it doesn't reflect the intellectual capital value in financial reports of business units. Collecting the data from 84 firms, this study examines the relationship between intellectual capital and financing costs, and the value of manufacturing companies listed in Tehran Stock Exchange for an eight-year period. In order to measure intellectual capital, the value-added of intellectual capital coefficient, value-added of intellectual capital and value added of capital applied were used the calculation of which were performed through Palic's method which is one of the most practical methods of calculating intellectual capital. In order to analyze the data, Pearson correlation, univariate and multivariate regressions, and Z Wang test were also performed. Results showed that the value added of capital applied, value added of intellectual capital, and the value added of intellectual capital coefficient negatively influenced weighted average cost of capital, yet they had no effect on enterprise value. Key words Value added of intellectual capital, value added of intellectual capital coefficient, value added of capital applied, weighted average cost of capital, firm value, financing cost