Investigate the Effect of Intangible Assets and Liabilities on Firm Performance: Evidence from Pakistan

Abstract

Assessing the asset utilization is complicated and not easy job to perform and it measures how effectively a company uses the resources to generate sales and have profitability. The success of company is largely relying on the ability to handle and control their assets and there are several factors which affect the firm performance, as this study used intangible assets and liabilities to explore their effect on organizational profitability in the context of manufacturing companies in Pakistan. Firm performance was measured by ROA and Profit Margin. Data of 20 manufacturing companies listed at PSX for 5 years (2012 to 2016) was analyzed using Panel (Estimated) Generalized Least Squares regression for Heteroscedasticity. We also run unit root and Hausman Test for robustness of results. Results suggested that intangible liabilities have significant negative influence on return on asset whereas and positive and significant effect of profit margin, conversely, intangible assets produce a negative effect on margins while a positive effect on ROA. However their relationship is not significant. This will help determine the credibility of financial intangible assets and intangible liabilities that supposed to influence the return on asset and profit margin.

Keywords: Invisible assets, Invisible liability, Return on equity, Profit Margin, Manufacturing, Pakistan, EGLS