Iranian Journal of

Accounting, Auditing & Finance

Received: 2021-09-18
Accepted after revision: 2021-10-12
Published online: 2021-11-20
RESEARCH ARTICLE DOI: 10.22067/ijaaf.2021.40721

The Effect of Board Characteristics on Intellectual Capital: Case of

Iran and Iraq
Hossien Shaval
Economics and Administrative Sciences, Baghdad University, Baghdad, Iraq
Safoura Rouhi
Economics and Administrative Sciences, Khayyam University, Mashhad, Iran

Abstract
The present study is concerned about the relationship between the board characteristics and
intellectual capital efficiency in companies listed on the Iran and Iraq Stock Markets. A multivariate
regression model is used for this study. Research hypotheses were tested using a 903 firm-year
observation sample from the Tehran Stock Exchange and 280 firm-year observations from the Iraq
Stock Exchange during 2012-2018 for both counties based on multiple regression patterns and pooled
data techniques. The results show that there is a significant relationship between board characteristics
and efficiency of intellectual capital, which means there is a negative and significant relationship
between the board independence, the board size, CEO ownership, and CEO gender, and intellectual
capital and a positive and meaningful relationship between CEO change and intellectual capital both in
Iran and Iraq. However, while the relationship between board independence and intellectual capital is
negative in Iraq, such a relationship is positive and significant in Iran.

Keywords
Intellectual Capital, Human Capital Efficiency, Structural Capital Efficiency, Communicational
Capital Efficiency, Board Characteristics

Corresponding author: Safoura Rouhi Number of Tables: 6

Email: safoura.rouhi1993@[Link] Number of References: 56
Pages: 17

[Link]
E-Issn: 2717-4131
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1. Introduction
Within today's knowledge-based economy, intellectual capital is the essential property of every
organisation and can contribute to performance from different aspects. Although the traditional
accounting methods play a significant role in the measurement and reporting of tangible assets,
within a knowledge-based economy where knowledge constitutes a considerable proportion of
properties, conventional accounting methods cannot measure and report the existing expertise in the
organisation that requires some remarkable changes. In intellectual capital accounting, properties
have no physical property, but they have considerable benefits for the firm's future cash flow.
Therefore, the inability of intellectual capital reporting is indicative of the failure of typical or
traditional accounting. However, their valuation in commercial deals is not an easy task and not
possible with current methods. Moreover, there is no theory or actual economic model for
intellectual capitals (Gogan, 2014).
The position and role of the firm's intellectual capital, financial performance, and organisational
value creation are consolidated in the literature of the global economy. Various empirical studies
across multiple business sciences areas show that wise and experienced staff or managers contribute
positively to the firm's value and performance. However, these studies focused on a firm's human
resources' intellectual capital and took the board's intellectual capital for granted. Similarly, even
the most comprehensive studies on corporate governance describe the structures and different
processes of management. Still, they do not refer to intellectual capital criteria or the knowledge of
the board. Hence, a significant gap remains in sound governance structures and restricts the
understanding of corporate governance's impact on firm performance and value (Kalyta, 2011).
One of the key corporate governance topics currently available to firm management and
shareholders is the board member characteristics (Carter, Simkins and Simpson, 2003). Smith
(1937) declares that managers do not always move forward to maximise shareholders' interests. A
conflict of interests between owners and management has brought about agency problems, leading
to firms' intellectual capital being inefficient and failing in the competition. Hence, according to
Jensen and Mechling (1976), supervisory mechanisms should be implemented to fill the gap
between ownership and management. One of the existing mechanisms to reduce agency problems
and information asymmetry between managers and shareholders is an efficient board as one of the
corporate governance's internal mechanisms.
By considering the significance of board characteristics in today's business world, the present
study concerns the effects of some board features on the intellectual capital of companies listed on
the Iraq Stock Exchange. The concept of intellectual capital is not clear, and different definitions
are proposed for that. In this regard, Rezaei et al. (2018) consider intellectual capital a working
strategy used simultaneously in the entire organisation and is a tool for advancing an organisation's
general plan. The conducted studies in the corporate governance system in different countries show
that the enhancement of corporate governance and, more importantly, the presence of an efficient
board would lead to the growth of the capital market in those countries, and there is a strong
correlation between these two factors (Rodrigues, Tejedo-Romero and Craig, 2016). Given the facts
mentioned above, the question here is whether the relationship between board characteristics and
intellectual capital is significant or not. Thus in this paper, the main objective is to analyse the
relationship between board characteristics and intellectual capital efficiency in companies listed on
the Iraq Stock Exchange, compare the results with the studies carried out in Tehran Stock
Exchange, and propose some keynotes in this field.

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2. Theoretical Principles, Literature Review, and Hypothesis Development

2.1. The Board Size
We mean the number of board members by the board size, which is a significant factor in its
effectiveness. We can observe different approaches to the relationship between board size and its
effectiveness by reviewing the literature. From the agency's point of view, we can argue that a giant
board is most likely cognizant of the agency problems because many people supervise the
management works (Nicholson and Kiel, 2003). Because the board's central role is to monitor the
management, studies on the board size only focus on supervisory issues (Xie, Davidson and Dadalt,
2003).

2.2. The Board Independence

Board independence is the unbounded members of the board. An unbound member of the board
is a member who has no executive responsibility in the firm. The number of unlimited board
members has a positive relationship with supervisors' effectiveness in providing financial
statements (Beekes, Pope and Young, 2004). According to Fama and Jensen (1983), firms' board
plays a pivotal role in the governance system. The board's primary function is to create efficient
governance for firms, provide independent supervision in executive managers' performance, oblige
the managers to be responsible against shareholders, and balance different beneficiaries' interests.
Therefore, people believe that when the board is more independent, it has more supervision of the
executive managers (Beasley, 1996; Peasnell, Pope and Young, 2000; Klein, 2002).

2.3. CEO Change

CEO change includes any replacement in the CEO position, the CEO's replacement of the
previous year with a new person in the current year. CEO certificate (CEO financial expertise):
financially educated management members are another characteristic of the firm board. The CEO
should have certain features and skills, especially in finance, and should be an expert, experienced,
and at the same time competent to be able to carry out the responsibilities, ideally.

2.4. CEO Gender

The CEO is Male 1; otherwise, it would be 0 (if the CEO is female). Most of the studies on CEO
gender diversity are based on how women's agency would improve the firm value. For example,
some studies perceived that a firm with gender diversity would perform better in management
because women benefit from some unique characteristics of resources and human capital for
business (Campbell and Minguez-Vera, 2008), while other studies have found an opposite effect
(Bohren and Storm, 2010; Adams and Ferreira, 2009) and some others discovered no relationship
(Carter et al., 2010).

2.5. Intellectual Capital

Edvinsson and Sullivan (1997) define intellectual capital as the knowledge that can be turned into
value. Marr (2004) describes intellectual capital as propulsion for a firm's competitive advantage
and associates with firm capability in management and knowledge application. Moreover, the
Canadian Association of Management Accountants defines intellectual capital as an item of
knowledge preserved by people, shared for acquiring future profits (Lswati and Anshori, 2007). An
issue for which there is a consensus is that intellectual capital indicates an intangible value of an
organisation, which is hard to express. Bontis (1998), Edvinsson and Sullivan (1997), and Stewart

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(1997), in their classification, divide intellectual capital into three components of human capital,
structural capital, and relational or customer capital.

2.6. The Relationship between Corporate Governance Components and Intellectual Capital
Different studies (e.g., Safieddine, Jamali and Noureddin, 2009; Chen, Cheng and Hwang, 2005;
Wang, 2008; and Salehi, Enayati and Javadi, 2014) show that corporate governance is a significant
factor in attracting intellectual capital. The presence of an appropriate corporate governance system
increases firms' capability for more absorption of intellectual capital (Safieddine, Jamali and
Noureddin, 2009). Corporate governance benefits all the firm's financial beneficiaries, including
investors, creditors, board members, management, staff, and different industries and economic
sections. Appropriate corporate governance plays a significant role in improving efficiency and
economic growth and, at the same time, elevates the trust of investors, which contributes to the
country's economy. Firms benefit from a sound corporate governance system, and in case the firm is
profitable, there is a higher motivation for using the corporate governance, the advantages of which
affect either directly (via easy access to financial resources and lower capital expense) or indirectly
(via gaining fame and more business opportunities) the economic system. In other words, the
absence of an appropriate corporate governance system in firms would lead to an inability to attract
and hold substantial intellectual capital (Safieddine, Jamali and Noureddin, 2009).
Ku Ismail and Al-musalli (2012) argue that intellectual capital performance in banks mentioned
by GCC is lower. Contrary to our expectations, the number of independent managers negatively
relates to intellectual capital performance in banks mentioned by GCC. All other variables have no
relationship with intellectual capital. Ishak and Al-Ebel (2013) indicate that intellectual capital
disclosure is positively associated with the board's effectiveness. These findings are significant for
policy-makers regarding the board's effectiveness in supporting investors at the asymmetry level.
Oba, Ibikunle and Damagum (2013) declare that the board's independence and audit committee
independence cannot describe the independent variable. The board size has a positive and
significant effect on the information disclosure quality of intellectual capital. Bohdanowicz and
Urbanek (2013) conclude that managerial ownership, external ownership, institutional ownership,
and ownership concentration positively affect intellectual capital and capital return productivity,
especially structural capital. The study results show that the interaction between ownership structure
and intellectual capital productivity is different in high-tech and low-tech industries. These findings
suggest that the ownership structure plays a significant role in intellectual capital and creating
productivity.
Elsaid and Ursel (2011) found that if the percentage of women on the board is higher, regardless
of other succession characteristics, such as whether the new CEO is from inside or outside the
company, the successor CEOs are more likely to be women. In addition, changes in CEOs from
male to female are associated with reducing several firm risk metrics. Samaha, Khlif and
Hussaineyc (2015) show that the board size, board composition, and audit committee positively and
significantly affect voluntary information disclosure, while CEO duality has a negative impact on
voluntary information disclosure. Attarita, Dampitakseb and Panmanee (2017) express that the audit
committee sessions positively affect the intellectual capital return. Simultaneously, some factors
like the size of the audit committee and the frequency of board sessions have a negative effect on
intellectual capital efficiency. However, this is not obvious whether the proportion of board
independence, the percentage of women on the board, or firms with a separate CEO and director
contribute to the intellectual capital or not. Ku Ismail, Abu Bakar, and Al-Musalli (2016) figure out
that state-owned firms have lower intellectual capital performance than private firms. Intellectual

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capital performance is also more economical for firms with equal CEO and director than firms that
separate these positions.
Moreover, firms' governance and ownership structure play a pivotal role in intellectual capital
performance among Malaysian firms. Liu, Pang and Kong (2017) declare that export increases the
firm innovation; remarkably second, different types of human capital have different and mediating
effects. More specifically, retired managers have a determining and mediating role in the
relationship between export and innovation, while highly educated staff has adverse moderating and
opposite effects. Torre et al. (2017) show that regardless of the intensity of organisational
technology, voluntary turnover has a negative impact on the relationship between human capital and
labour productivity. In contrast, non-voluntary turnover increases the relationship between human
capital and labour productivity and is even more useful for organisations with more compact
technological operations.
Debrah, Oseghale and Kweku (2018) indicate that Africa's long-term growth overview relies on
human capital development. South African countries' stability requires education and labour
training in the global market's skills centre. Mthanti and Oiah (2018) perceive that the relationship
between human capital is strong at economic development levels. Sardo and Serrasqueiro (2018)
argue that the return on the current period's intellectual capital positively affects European firms'
financial performance with high, medium, and low technology. Besides, a non-linear relationship
was found between growth opportunities and financial performance. Findings indicate that more
efficient use of firms' intellectual capital affects the positive relationship between growth
opportunities and financial performance. The results show that the effective use of intellectual
capital impacts large firms' growth opportunities in the current period. Further, there is a non-linear
relationship between ownership concentration and growth opportunities. Gomez-Mejia et al. (2019)
indicated that female CEOs are considered more conservative and risk-averse than male CEOs. The
results also confirm those female CEOs in low systematic risk areas, although more conservative,
take more cautious risks that produce better long-term outcomes than their male counterparts. Shan
(2019) found that managerial ownership and board independence have a negative impact on
company performance. Also, board independence has a negative relationship with managerial
ownership and vice versa. Ozbek and Boyd (2020) indicated that firm size has significant
moderating effects on the relationship between governance structure and market performance.
Shukla, Narayanasamy and Krishnakumar (2020) found that board size positively affects the Indian
banks' accounting performance. In addition, board size is insignificant in determining the quality of
Indian banks assets. Andreeva et al. (2021) found that when a country's environment has more
access to skilled labour, a company's human and structural capital has less of an impact on its
innovation performance. Troise et al. (2021) showed that relational capital positively influences
collective investment decisions and explains the success of collective equity financing campaigns.
While factors related to human capital and structural capital have a limited positive effect on
investment decisions. Salehi et al. (2021) found that knowledge management positively and
significantly affects intellectual and social capital relationships. Also, intellectual capital and social
capital have a significant impact on innovation. D’Amato (2021) showed that companies with high
levels of intellectual capital have less financial leverage and are more profitable and riskier than
companies with low levels of intellectual capital. In addition, the results showed that the company's
profitability and risk mediate the relationship between intellectual capital and financial leverage.
Zahedi and Naghdi Khanachah (2021) found that knowledge management processes affect the
development of an organisation's intellectual capital. Knowledge management processes also help

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raise the level of innovation in the organisation through the development of intellectual capital. The
results also showed that managers should focus on developing their human capital through young
educated professionals to maximise internal capacity, create knowledge, and move towards
improving the organisation's human capital. Potharla and Amirishetty (2021) indicated that the
relationship between board size and board independence with a company’s financial performance is
non-linear inverted U-shaped. Chalu (2021) found that board size and gender diversity significantly
negatively affected audit report delays. Khong, Hooy and Lye (2021) indicated that board
independence has a negative effect on private information-based trading, and this effect can be
strengthened by the disclosure quality, female independent Managers and board gender diversity,
while the CEO duality weakens this effect. Alves (2021) found that the decline in the quality of
profit associated with CEO duality is weakened when the board has a higher proportion of
independent managers. Rashid (2021) indicated that board independence does not affect the
corporate social responsibility activities and the relevant report. However, the lack of impact of
board independence and corporate social responsibility reporting is offset by the power of
shareholders. Domestic ownership, firm age, firm size, growth opportunities, and market capital
positively impact such reports. Ting (2021) found that female CEOs have the same power and
performance as male CEOs in a sample of Chinese banks. When women reach the top, they have
more prestige and ownership than men. Female CEOs perform even better than male CEOs in non-
governmental banks. Brueckner Bosak and Lang (2021) indicated that a comparison between male
and female CEOs showed that female CEOs showed less power and more motivation than male
CEOs.

Given the facts as mentioned earlier, the hypotheses of the study are as follows:
H1: There is a significant relationship between board independence and intellectual capital in
companies listed on the Stock Exchange of Iraq and Iran.
H2: There is a significant relationship between board size and intellectual capital in companies
listed on the Stock Exchange of Iraq and Iran.
H3: There is a significant relationship between CEO change and intellectual capital in companies
listed on the Stock Exchange of Iraq and Iran.
H4: There is a significant relationship between CEO gender and intellectual capital in companies
listed on the Stock Exchange of Iraq and Iran.

3. Research Methodology
This study is causal-correlational. The methodology is quasi-experimental, and retrospective
within positive accounting studies carried out based on real information.

3.1. Statistical Population

The statistical population of the study is limited to the following firms:
1- Have no change in the fiscal year during the period of study (2012-2018) in Iraq and Iran,
2- Their financial information is available,
3- Are not affiliated with financial firms (banks, financial institutions) and investment or financial
intermediaries, and;
4- Are active during the period of study.
Hence, the study period includes five consecutive years from 2012 to 2018 for listed firms on the
Iraq Stock Exchange and 2012-2018 for listed firms on Iran Stock Exchange.

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Given the limitations, 129 firms were selected for Iran and 35 firms for Iraq to test the hypotheses.

Table 1. The number of firms in the statistical population

Firms
Total no.
Description eliminated in
of firms
total periods
Total listed firms on the Tehran Stock Exchange 445
Eliminating financial intermediaries, finance,
88
insurance, and investment firms
Firms with more than six months of transaction halt 112
Firms entered the stock exchange during the period
4
of study
Elimination due to information unavailability 112
Statistical population 129
Listed firms on Iraq Stock Selected
No. of firms Eliminated firms
Exchange firms
Bank firms 39 39
Insurance firms 5 5
Investment firms 9 9
Service firms 10 4 6
Industrial firms 25 10 15
Hotel and tourism firms 10 2 8
Agricultural firms 6 0 6
Telecommunication firm 2 2
Financial transfer firm 17 17
Total sample firms 123 88 35

3.2. Data Collection Method

The required information about the study was gathered from different resources. Data related to
the research literature and theoretical issues were collected from library resources, including books,
Persian and Latin journals, and internet websites, and data related to firms (balance sheets and profit
and loss statement) were used as the research instrument. Primary and raw data and information
required for hypothesis testing were collected by using the information bank of Tehran Stock
Exchange, including Tadbir Pardaz and Rah Avaran-e Novin Software, as well as published reports
of Tehran Stock Exchange via direct access (by analysing the disclosed reports in the Codal
Website then manual collection) in the form of CDs and online website of [Link] and from other
required resources.
3.3. Data Analysis
The data analysis method is cross-sectional and year-by-year (panel data). In this paper, the
multivariate linear regression model is used for hypothesis testing. For analysing the obtained data,
descriptive and inferential statistical methods were employed. The frequency distribution table was
used to describe data, and at the inferential level, F-Limer, Hausman, normality, and multivariate
linear regression tests were used for hypothesis testing.
3.4. Research Model
The following multivariate regression model is used for hypothesis testing:
Model (1)
𝑉𝐴𝐼𝐶𝑖𝑡 = 𝑎0 + 𝑎1 𝐵𝐼𝑛𝑑𝑖𝑡 + 𝑎2 𝐵𝑠𝑖𝑧𝑒𝑖𝑡 + 𝑎3 𝐶𝐸𝑂. 𝑐ℎ𝑎𝑛𝑔𝑒𝑖𝑡 + 𝑎4 𝐶𝐸𝑂. 𝑠ℎ𝑎𝑟𝑒𝑖𝑡 + 𝑎5 𝑀𝑇𝐵𝑖𝑡
+ 𝑎6 𝐺𝐶𝐸𝑂𝑖𝑡 + 𝑎7 𝑅𝑒𝑡𝑢𝑟𝑛𝑖𝑡 + 𝑎8 𝐿𝑜𝑠𝑠𝑖𝑡 + 𝑎9 𝑠𝑖𝑧𝑒𝑖𝑡 + 𝑎10 𝐿𝐸𝑉𝑖𝑡 + 𝑎11 𝑅𝑂𝐴𝑖𝑡
+ 𝑎12 𝑅𝑂𝐸𝑖𝑡 + 𝑎13 𝐺𝑟𝑜𝑤𝑡ℎ. 𝑠𝑎𝑙𝑒𝑠𝑖𝑡 + 𝑎14 𝐴𝑔𝑒𝑖𝑡 + 𝑎15 𝑌𝑒𝑎𝑟𝑖𝑡 + 𝑎16 𝐼𝑛𝑑𝑢𝑠𝑡𝑟𝑦𝑖𝑡 + 𝜀𝑖𝑡

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Where:

VAIC: is the intellectual capital that Pulic's model calculates

BInd: is the board independence, which is equal to the unbounded members of the board to total
members of the board
Bsize: is the board size that is equal to total board members
CEO change: is a CEO change that if the CEO is changed 1, otherwise, 0.
GCEO: is CEO gender that if the CEO is male 1, otherwise 0.
Size: is the firm size, which is the natural logarithm of firm assets
LEV: is the financial leverage of the firm, which is equal to total liabilities to total assets of the
firm
ROA: Return on assets which are equal to net profit to total assets of the firm
ROE: return on equity, which is equal to net profit to book value of equity
Growthsales: growth in sales is equal to the sales of the current year minus that of the previous
year divided by the sales of the last year of the firm
Age: firm age is equal to the time interval between data of establishment and the year understudy
Loss: a substantial loss that if the firm is losing 1, otherwise 0.
Return: stock return is equal to the market value of the current year minus that of the previous
year plus the dividends divided by the market value of the last year
CEO_share: CEO ownership, which is equal to the amount of share available to the CEO divided
by total shares published by the firm
MTB: book value to return on equity of the firm
Year: dummy variable of the year
Industry: dummy variable of the industry
It is worth mentioning that the above models were tested only once for Iranian and Iraqi firms'
data, then their outputs will be analysed and discussed.

4. Data Analysis
4.1. Descriptive Statistics
In this paper, four models analyse board members' independence, size, board members, and
gender on intellectual capital. The present study encompasses the panel data method in its database,
including 129 Iranian and 35 Iraqi firms. For estimating the model, the variable of intellectual
capital is used.
Moreover, for modelling the intellectual capital, some variables like board independence (Bind),
board size (Bsize), CEO change (CEO change), CEO ownership (CEO share), book value to market
equity of the firm (MTB), CEO gender (GCEO), stock return (Return), dummy variable of firm loss
(Loss), firm size (Size), financial leverage (LEV), return on assets (ROA), return on equity (ROE),
sales growth (Gross Sale), firm age (Age), and dummy variables of industry and year were added to
the model as the descriptive variable. The primary source of these data is the Central Bank, Tehran
Stock Exchange, Codal Website, and Rah Avard-e Novin Software. Tables 2 and 3 illustrate the
information of the model variables for Iranian and Iraqi data.

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Table 2. Descriptive statistics for Iranian variables
Sign Variable Total mean Std. dev. Min Max
V A IC it Intellectual capital 5.929 5.521 -13.119 44.384
Blnd it Board independence 0.732 0.172 0.000 1.000
Bsize it Board size 5.059 0.338 5.000 7.000

CEO .Change it CEO change 0.288 0.453 0.000 1.000

CEO .Share it CEO ownership 0.215 0.288 0.000 0.954

Book value to market equity
MTB it of the firm
0.376 0.311 -3.286 1.906

GCEO it CEO gender 0.953 0.211 0.000 1.000

Return it Stock return 0.599 1.264 -0.663 9.234

Loss it Dummy variable of loss 0.126 0.332 0.000 1.000

Size it Firm size 14.200 1.518 10.533 19.150

LEV it Financial leverage 0.602 0.227 0.090 2.315

ROAit Return on assets 0.256 0.942 -16.846 0.631

ROE it Return on equity 0.256 0.942 -16.846 6.888

Gross .Sale it Sales growth 0.208 0.545 -0.845 7.705

Age it Firm age 38.031 12.806 10.000 65.000

Resource: the database of the study
Table 3. Descriptive statistics for Iraqi data
Sign Variable Total mean Std. dev. Min Max
V A IC it Intellectual capital 5.974 15.266 -42.511 160.984
Blnd it Board independence 0.127 0.204 0.000 0.857
Bsize it Board size 8.428 3.288 5.000 21.000

CEO .Change it CEO change 0.632 0.483 0.000 1.000

CEO .Share it CEO ownership 1.828 23.052 0.000 304.136

Book value to market equity
MTB it of the firm 0.661 1.154 -1.632 9.811

GCEO it CEO gender 0.926 0.263 0.000 1.000

Return it Stock return -0.164 2.999 -13.394 18.883

Loss it Dummy variable of loss 0.365 0.483 0.000 1.000

Size it Firm size 22.375 1.312 19.256 26.298

LEV it Financial leverage 0.432 0.608 0.003 4.069

ROAit Return on assets -0.039 0.318 -3.182 0.338

ROE it Return on equity -0.171 3.024 -38.674 2.786

Gross .Sale it Sales growth 3.133 35.082 -5.506 459.783

Age it Firm age 31.457 13.314 11.000 70.000

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4.2. The Results of the Unit root Test of Variables

By analysing the unit root for the Iranian data, all variables are mostly at no unit root level
(stationary). The obtained LM statistic for each variable is reported in Table 3-4. Only the variables
of VAICit, SCEit, Returnit, AGEit are at the unit root level.

The obtained LM statistic for the unit root test of this variable rejects the null hypothesis
concerning the absence of unit root at 99% probability level for VAICit, SCEit, and AGEit with 90%
probability for the variable of Returnit. With one-time differentiation, the variables of Returnit and
AGEit have no unit root. Moreover, the second-time distinction of the variables of VAICit and SCEit
is also with no unit root.

All variables are mostly at no unit root level (stationary). The obtained LM statistic for each
variable is reported in Table 4. Only the variables of SCEit, CCEit, GCEOit, and Ageit are at the unit
root level. The obtained LM statistic for this variable's unit root test rejects the null hypothesis
concerning the absence of unit root at a 99% probability level. With one-time differentiation, the
variables of GCEOit and AGEit have no unit root. Moreover, the second-time distinction of the
variables of CCEit and SCEit is also with no unit root.

Table 4. The results of the Hadri unit root test for the Iranian data
Second-
First-order order First-order
Variable Level Variable Level
differentiation differentiat differentiation
ion

V A IC it 0.000 0.045 1.000

GCEO it 0.996

ROE it 0.999
Return it 0.803 0.999

Gross .Sale it 0.953 0.999 Loss it 0.915

Age it 0.000 0.425 Size it 0.591

Blnd it 0.999 LEV it 0.731

Bsize it 0.929 ROAit 0.982

CEO .Change it 0.999

CEO .Share it 0.853

MTB it 0.669
Note: the null hypothesis is the absence of a unit root in variables. LM statistic is reported. ***, **, and * show the
significance level at 99, 95, and 90%.

4.3. Inferential Statistics

Table 6 depicts the model results (1) estimation of Iranian and Iraqi firms' data. The first column
of this table shows the name of contributing variables to the above dependent variables.

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75 Iranian Journal of Accounting, Auditing & Finance
RESEARCH ARTICLE
Table 5. The results of the Hadari unit root test for the Iraqi data
First-order Second-order First-order
Variable Level Variable Level
differentiation differentiation differentiation
V A IC it 0.995 GCEO it 0.009 0.866

ROE it 0.321 Return it 0.997

Gross .Sale it 0.755 0.988 Loss it 0.540

Age it 0.000 0.315 0.849 Size it 0.278

Blnd it 0.461 LEV it 0.598

Bsize it 0.293 ROAit 0.528

CEO .Change it 0.887 CEO .Share it 0.779

MTB it 0.994
Note: the null hypothesis is the absence of a unit root in variables. LM statistic is reported. ***, **, and * show the
significance level at 99, 95, and 90%.

Table 6: The results of model estimation for Iranian firms

Model (1) for the Iranian firms Model (1) for the Iraqi firms
Variable
Coefficient (Standard error) Coefficient (Standard error)
-51.550*** -7.444*
Constant
(17.239) (4.154)
2.198*** -3.583**
BIndit
(0.829) (1.416)
-2.220** 0.124**
Bsizeit
(1.246) (0.066)
CEO 0.668* 0.248
Changeit (0.472) (0.395)
-1.279* -0.298*
CEO_shareit
(0.998) (0.216)
-7.241*** -0.203
MTBit
(0.699) (0.218)
-0.639 -0.457
GCEOit
(2.102) (0.454)
-0.682*** 0.093*
Returnit
(0.286) (0.069)
-1.102* -0.978**
Lossit
(0.643) (0.492)
4.938*** 0.522**
Sizeit
(1.387) (0.197)
4.606*** -0.041
LEVit
(1.440) (0.260)
8.178*** 0.562
ROAit
(2.706) (0.485)
0.626** 0.011
ROEit
(0.313) (0.009)
Growth 0.344* 0.012***
Salesit (0.198) (0.001)
-0.083 -0.056***
Ageit
(0.242) (0.021)
Adj. R-
0.2936 0.5095
squared
Note: ***, **, and * show the significance level at 99, 95, and 90%. Resource: research findings

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RESEARCH ARTICLE
As can be seen in the table, the results of the robust model estimation are reported. In these
models, panel data and four classic econometrics hypotheses are evaluated, and reliable results will
be reported. These four hypotheses include collinearity among variables, exogeneity of descriptive
variables, the variance of homogeneity, and the absence of serial autocorrelation among the
disruptive components.
Given the applied regressions, the intercept of the Iranian firms is significant for all models. This
model's intercept for Iranian and Iraqi firms is -51.5500 and 14.1920, respectively, significant at the
99% level.
Given the model estimation for Iranian and Iraqi firms, the effect of board independence (Blnd)
on intellectual capital is positive for the Iranian data at a 95% confidence level. In contrast, the
impact of board independence on intellectual capital is negative for Iraqi data at a 95% confidence
level. By a 1% increase in board independence, the Iranian firms' intellectual capital increased by
2.1985%, and the intellectual capital of Iraqi firms decreased by -3.5828%.
The board size (Bsize) causes the decrease of intellectual capital in Iran and its increase in Iraq.
For example, by a 1 % increase of Bsize variable, intellectual capital decreased at the 95% level for
the Iranian firms by -2.2205% and increased by 0.1242% at the 95 % level for the Iraqi firms.
CEO change (CEO change) would increase Iran's intellectual capital but not affect the Iraqi
firms. The coefficient of this variable in the model for Iran and Iraq is 0.6684 and 0.2479,
respectively.
CEO gender (GCEO) does not affect Iranian and Iraqi firms' intellectual capital because its p-
value for the Iranian and Iraqi firms is more than 5%, which shows no significant relationship
between this variable and intellectual capital in both countries.

5. Conclusion
The present study is concerned about board independence, the board size, CEO gender, CEO
change, CEO ownership, and companies' intellectual capital on the Stock Exchange in Iran and Iraq.
The hypothesis testing results revealed a significant relationship between board independence and
intellectual capital in companies listed in Iran and Iraq. This relationship is positive for Iranian
firms. Still, it is negative and significant for the Iraqi firms. The results of the present study are in
line with that of the Ku Ismail and Al-musalli (2012) declare that there is a significant and negative
relationship between board independence and intellectual capital in Iraq and in contrast with that of
the Attarita Dampitakseb and Panmanee (2017) who show that there is no relationship between
board independence and intellectual capital. The reason for such a difference can be the economic
status and dominant atmosphere in both countries.
Moreover, this study demonstrates that board size lowers the intellectual capital in Iran and
increases Iraq. This means that by a 1 % increase of the variable, the intellectual capital will
decrease for the Iranian and Iraqi firms, which are in line with the findings of Ku Ismail and Al-
musalli (2012), who suggest that there is a negative and significant relationship between board size
and intellectual capital and is in contrast with that of the Oba, Ibikunle and Damagum (2013), state
that there is no relationship between board size and intellectual capital. On the other hand, the
present study also analyses the relationship between CEO change and intellectual capital, showing
no relationship between CEO change and intellectual capital efficiency in both countries. This
means that CEO change does not contribute to the amount of intellectual capital in both countries.
These results are in contrast with that of Ku Ismail, Abu Bakar and Al-Musalli (2016), who posit
that there is a positive and significant relationship between CEO ownership and intellectual capital
and are in line with that of Ku Ismail and Al-musalli (2012) and Oba, Ibikunle and Damagum.

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DOI: 10.22067/ijaaf.2021.40721
77 Iranian Journal of Accounting, Auditing & Finance
RESEARCH ARTICLE
(2013) who declare that there is no relationship between these factors.
Finally, it is worth mentioning that this paper is about the relationship between CEO gender and
intellectual capital. The hypothesis testing results show that CEO gender (GCEO) or the CEO's
masculinity has no impact on both countries' intellectual capital efficiency. This finding is in
contrast with the results of Ku Ismail, Abu Bakar and Al-Musalli (2016), Safieddine, Jamali and
Noureddin (2009), who states that there is a significant relationship between CEO gender and
intellectual capital and is in conformity with that of the Ku Ismail and Al-musalli (2012), who assert
that there is no relationship between CEO gender and intellectual capital. Further, some variables,
including CEO duality, financial expertise, and board and CEO industry, the data of which were not
available in Iraq; we were obliged to omit them from the research model.

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Shaval, H., Rouhi, S. (2021). The Effect of Board Characteristics on Intellectual Capital: Case of
Iran and Iraq. Iranian Journal of Accounting, Auditing and Finance, 5(3), 65-81. doi:
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