The Impact of Intangible Assets on Company Performance in Georgia

Abstract

Objective: This study investigates the effect of intangible assets on the financial performance of companies in Georgia. The focus is on how intangible resources, measured by the Representativeness of Intangible Assets (RIA), influence Return on Assets (ROA) as a key performance indicator.

Methodology: The research utilizes a panel regression analysis with a fixed-effects model to examine the relationship between intangible assets and company performance. The dataset comprises financial reports from 845 Georgian companies, spanning the period from 2019 to 2022, obtained from the Service for Accounting, Reporting, and Auditing Supervision of Georgia. The study excludes companies from the financial industry and those with negative equity.

Results: The findings indicate that intangible assets have a significant and positive impact on firm performance. The study reveals that companies with a higher proportion of intangible assets outperform their peers, supporting the hypothesis that investment in intangible resources leads to improved profitability. Company-specific factors also play a substantial role in determining firm performance.

Conclusions: This study provides empirical evidence that intangible assets are key drivers of profitability in Georgian companies. It highlights the importance of intangible resources in achieving competitive advantages, particularly in emerging markets transitioning towards knowledge-based economies. Limitations include incomplete disclosure of intangible assets in company financial statements, which may affect the analysis' comprehensiveness.

Implications: The study offers insights for corporate strategy and policy, emphasizing the need for companies to invest in intangible assets and for policymakers to foster an environment conducive to the development of these resources.