Value Added Intellectual Coefficient (VAIC TM ) and Financial Performance: Empirical Evidence from the Italian Manufacturing Sector Fabrizio Rossi 1 , Domenico Celenza 2 1 Department of Electrical and Information Engineering, University of Cassino and Southern Lazio, Cassino (FR), Italy 2 Department of Economics and Law, University of Cassino and Southern Lazio, Cassino (FR), Italy f.rossi@unicas.it d.celenza@unicas.it Abstract: The goal of this paper is to verify the existence of a relationship between the efficiency of intellectual capital and the financial performance of Italian manufacturing firms. The analysis extends over the period 2002-2011 and can be divided into three steps. In the first step, the possible relationship between the value of intellectual capital, using the VAIC TM (Pulic, 2000, 2004) as a measure of efficiency, and business performance measured by classical indicators present in literature (ROI, ROE and ROS) was investigated, and then the relationship between the VAIC TM and Market to book value (M/BV) was measured, given that the results produced by the literature appear discordant. In the second step, the sample was reordered by taking into account the VAIC ranking and a second linear regression was performed in order to verify whether the relationship was statistically more robust than the previous one. Lastly, the sample was divided into two high and low VAIC portfolios, respectively; then the calculation of the average yields was performed and a test was carried out on the difference between the means of the two portfolios. From the results obtained there would appear to be a positive and statistically significant difference between the two portfolios: the high VAIC portfolio outperforms the low VAIC portfolio. Keywords: Intellectual Capital; Value Added Intellectual Coefficient (VAIC TM ); Financial performance; Market to book value; Italian Manufacturing Sector 1. Introduction In recent years, many empirical studies have focused on the analysis of the company’s value and on the relationship between accounting performance and stock return (Ball and Brown, 1968; Ohlson, 1995). There has been a radical change in research perspectives and in the vision of the firm as an actor working in an increasingly complex and turbulent financial system. From the vision of Modigliani and Miller (1958), according to which a company's value depends only on the nature of the asset regardless of the funding sources used to finance them, and from the perspective of the Modern Portfolio Theory (Markowitz, 1952) and the Capital Asset Pricing Model (Sharpe, 1964), which state that there is a linear relationship between risk and return explained by the beta, there have been significant developments in the analysis of performance. In more recent years, there has been a growing emphasis on the importance of human capital, intellectual capital in general, and its interaction with physical assets (Grossman and Hart, 1986; Hart, 1995; Hart and Moore 1990, 1994), up to the point of considering the firm as an interdependent summation of assets (Moore, 1992). In this context, a growing literature has been established on the evaluation of human capital (Zanda et al., 1993) and the relationship between the management, the efficiency of intellectual capital and financial performance. Assuming that modern enterprises invest in knowledge, innovation and intellectual capital as a source to create value (Prandstraller, 2009) and drivers to obtain a competitive advantage in the markets (Trequattrini, 2008), intellectual capital has assumed a prominent role within the analysis of the value of companies. The efficiency of intellectual capital can be examined from different perspectives, not least the impact it may have on equity markets and the Market to Book Value (M/BV). Returning to the theory of the efficiency of stock markets (Fama, 1970), there has been an attempt to investigate the role of intellectual capital and its ability to explain the difference between Market Value and Book Value. The goal of this paper is to verify the existence of a relationship between the efficiency of intellectual capital and the financial performance of Italian manufacturing firms. The analysis extends over the period 2002-2011 and can be divided into three steps. In the first step, the possible relationship between the value of intellectual capital, using the VAIC TM (Pulic, 2000, 2004) as a measure of efficiency, and business performance measured by classical indicators present in literature (ROI, ROE and ROS) was investigated, and then the relationship between the VAIC TM and Market to book value (M/BV) was measured, given that the results produced by the literature appear discordant. In