Organizational Capital and Firm Value in Emerging Markets: A Dynamic Panel Analysis of N-11 Economies
DOI:
https://doi.org/10.62270/jirms.v7i2.150Keywords:
Organizational capital, Audit quality, Tobin’s Q, N-11 economies, System GMM, Dynamic panelAbstract
Purpose—The question of whether resource-specific organizational capital (OC) can create value premium for a firm or is underpriced due to the poorly developed disclosure and enforcement in emerging markets is still not settled from a theoretical point of view. Theoretically, this is important as the RBV and an information-asymmetry account make directly opposing predictions regarding the price of OC when institutions are weak; however, much of the previous research has limited itself to the assumption that the RBV premium is valid in general, without directly testing the information-asymmetry account. This research explores the relationship between OC and firm value as well as firm profitability of the Next-11 (N-11) listed manufacturing firms, and whether audit quality (AQ) can serve as a substitute for poor institutions to facilitate the recognition of OC by the market.
Study Design/methodology/approach— Using an unbalanced ten-year (2014-2024) firm-year data set from N-11 countries is used to proxy the value of the firm using Tobin’s Q and profitability through ROE. The process of measuring OC is in line with Peters and Taylor’s perpetual inventory method (2017). In terms of methodology, pooled OLS, firm-fixed effects, and two-step system GMM are utilized to solve endogeneity and the problem of dynamic bias.
Findings— Organizational capital negatively predicts Tobin's Q under static models, but this effect turns insignificant under system GMM; its ROE association becomes weakly positive. Big-4 audit quality yields a 4.6-percentage-point ROE premium but does not moderate the OC–performance link or raise firm value. This suggests audit quality certifies earnings, not unrecorded intangibles; so, OC's apparent RBV-predicted premium is masked by dynamic-panel bias rather than genuinely absent, marking a boundary condition where certified and unrecognized intangibles diverge in value.
Practical Implications—Organizational capital is undervalued in N-11 markets. An audit brings credibility to the earnings, but it does not close the gap in intangible valuation. Regulators need to focus on broad intangible disclosure rules. The benefit to managers is greater from voluntary structured organizational capital disclosures than from audit assurance. Engagement by the four big firms should not be regarded as proof of intangible quality for investors and auditors.
Originality/Value—The study's primary contribution is theoretical because it compares and contrasts the predictions of RBV with information-asymmetry predictions in the weak institutions’ context, and outlines a threshold condition on the role of audit quality. It adds to the literature by providing a multi-country panel of emerging markets and dynamic GMM analysis.
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Data Availability Statement
All data supporting this study’s findings were collected from publicly available sources. Financial and corporate governance indicators were sourced from the annual statements of publicly traded firms and from internationally recognized financial databases covering the Next-11 (N-11) economies for the period 2014–2024. Requests for datasets produced or examined during the research process can be sent to the corresponding author. Use of restricted-access proprietary databases may, in certain instances, require a license agreement with the respective database owner.
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Copyright (c) 2026 Mahwish Ayub, Imran Riaz
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