The dawn of knowledge and information has changed the mechanism of companies. Earlier the focus of companies was on the optimum utilization of physical and tangible assets only, but now the companies create their competitive advantage through the effective use of intangible assets owned by them. As a result, Intangible assets have become an imperative part of a companys performance and success. Intangible assets are always present in the companys operations. However, the popularity of this field has only increased dramatically in the recent several decades. Lawrence R. Dicksee was the first to address intangibles in 1896. As intangible assets have become more significant, the corresponding significance of tangible assets has declined and hence it has taken primacy over traditional physical resources in the pursuit of competitive advantage (Firer and William, 2003). Indeed, it has been asserted that financial and material assets are quickly turning into commodities and are no longer the main forces behind the economy (Lev, 2001). 

In todays fast changing and competitive business climate, organisations try to acquire strategic assets that can serve as the foundation for producing and maintaining a companys competitive edge. A companys strategic assets can take numerous shapes. One of the core strategic assets is undoubtedly intangible since intangible Kramer et al. (2011) and Van Ark et al. (2009) argue that intangible assets are being seen as important motivators of innovation and knowledge production. Saunila and Ukko, (2014) discovered that in practically all industries, the lucrative operation and administration of organisations are growing dependent on their capacity to produce inventive-ness, which intangible assets may generate Intangible investment is considered as a vital resource that helps a business maintain its competitive edge. Investment in intangible assets is actually rising internationally (Sayem et al., 2024). 

Corrado et al. (2005) explained that Investments in intangibles are classified into three broad groups: computerized information (computer databases and programs), innovation property (scientific and non-scientific R&D), and economic competencies (knowledge embedded in a firms s specific human capital and branding).

Problem statement

Very few studies are available with respect to developing countries like South Africa (Chen et al., 2005), Taiwan (Banker et al., 2008), Tehre (Behname et al., 2012) and China (Zhu and Huang, 2012; Wu and Hao, 2020). Specifically with respect to Bangladesh few studies are available and that too on intellectual capital. Infect, not even a single study could be found specifically related to intangibles and performance with reference to Bangladesh. Also, intangible assets have been studied with specific dimensions by various authors as specifically in relation to R&D (Bosworth and Rogers, 1998; Lau, 2003; Hall and Oriana, 2004; Banker et al., 2008; Ehie and Olibe, 2010), Intellectual Capital (Chen et al., 2005; Guo et al., 2011), Patents and Trademarks (Greenhalgh and Rogers, 2007), etc. 

Very few research have fully examined intangibles. Despite an excellent corpus of studies on intangible assets and business performance, there are still numerous gaps in our understanding of the relationship between the two. These gaps present chances for further investigation. The challenges outlined above occur because there is no formal measuring model for intangible assets. Following the study of the vast literature, it is unclear how the interface of intangible assets influences a firms performance characteristics, as earlier literatures in other nations do not clearly define this link. Though the majority of academics find that intangible assets have a beneficial impact on firm performance, their adversaries frequently challenge them. Generate a negative or no impact scenario. As a result, scholars, entrepreneurs, and practitioners do not typically acknowledge the strategic relevance of intangible assets valuation approaches, as well as evidence of a favourable association between intangible assets and company success. 

Weve seen global corporations locate some of their innovative activities in developing economies such as Bangladesh. Using these creative operations as examples some local Bangladeshi companies have already begun to invest in intangible assets such as research and development.  To promote and concentrate them in intangible assets, establishing a link between intangible assets and business performance is critical so that our owners community may contribute more to the growth of the nations economy. The aforementioned inadequacies inspire our research on this topic by examining expenses in intangible assets in greater detail than previously in the context of Bangladesh. Besides, the variation of profitability of pharmaceuticals companies over the periods and between the companies is to be investigated. In addition, the impact of expenses in intangibles assets on profitability of Pharmaceuticals Company in Bangladesh is also assessed.

The accounting-finance-marketing interaction has been the subject of numerous studies in the field of intangible asset and business performance study. These studies examined the role that intangible assets play in giving businesses a competitive edge as well as the measurement of intangible expenditures. When adjusting for other variables, researchers primarily concentrated on demonstrating a strong and direct correlation between revenue, profitability, market value, and innovative activities like R&D- For instance, Lin and Lo, (2015) analyzed panel data of Taiw manufacturing companies to determine how much they spent on intangibles such as marketing, R&D, staff training, technology acquisition, and purchase of software and databases. They provided proof that investment in intangibles increased productivity. Chun and Nadiri, (2016) examined the contribution of intangible-int businesses to the rise of overall productivity using the production pos frontier and discovered a significantly stronger relationship. 

Montresc Vezzani, (2016) examines a cross-section of European businesses to lo the relationships between investments in intangibles and innovation. R&D, software, design, training, reputation/ branding, and organizes business procedures are used to gauge how much they spend on intangible assets. They concluded that, for manufacturing enterprises only--not service organizations- the amount invested in intangible assets is critical and significant. Studies that take a resource- or knowledge-based perspective generally demonstrate a positive and direct relationship between innovation and business performance and investments in intangibles (Kong, 2010; Goyal, 2012; Gamayuni, 2015; Satt, 2016). 

Theoretically, the relationship between IC and company performance is fairly clear-cut and basic. A number of research have tried to explain the connection between company success and the integrated parts of IC According to research by (Komnenic and Pokrajcic, 2012;  Amin et al., 2014; Han and Li, 2015) IC has a beneficial impact on the financial performance of the companies. According to several studies (Pal and Soriya, 2012; Xinyu, 2014; Bontis et al., 2015), IC is a major factor in the performance and competitive advantage of the firms. They assert that the elements of IC have a significant impact on the innovations made by the firms. As per Dženopoljac et al. (2017) we might refer to study as the most recent work in this context nonetheless, the literature thread has some contradicting findings. The findings show that intangible assets have inconsistent behavioral consequences on business performance. Due to their subpar performance in the market, the firms are unable to maximize shareholder wealth even if intangible assets cause a notable increase in their EPS (a measure of financial success) stock market of Bangladesh by Ferdous and Rahman, 2019) Das et al. (2009), for instance, did not find any statistical support for the idea that R&D spending explains a companys increased sales, accounting profitability, or enhanced market value. 

The results of studies conducted by Tahinakis and Samarinas, (2013) and Ferdaous and Rahman, (2017) in the contexts of Greece and Bangladesh, respectively, likewise supported declining stock prices for companies relative to R&D expenditure. However, some research on the relationship between advertising spending and business success indicates that advertising spending has a detrimental effect on business performance (Surocca et al., 2010).  The impact of intangible assets on the market value, financial performance, and financial policies of technology companies across 14 nations was examined by Qureshi and Siddiqui, (2020). According to their results, intangible assets had significant adverse impact on ROE and ROA. This suggested that a corporation with more intangible assets would have lower ROE and ROA, and vice versa. Nevertheless, other studies found that intangible assets had a significant positive impact on only ROA (Gamayuni, 2015; Zhang, 2017; Kaymaz et al., 2019; Felix et al., 2020; Li & Wang, 2014), and on both ROA and ROE (Haji & Ghazali, 2018; Ferdaous & Rahman, 2019; Vanderpal, 2019), however, found that there is no meaningful correlation between intangible assets and income across a range of industries.

Hypothesis development

Expenses in intangible assets and return on assets (ROA)

In the previous studies, some authors revealed that the influence of intangible assets on ROA is positive association (Lehenchuk et al., 2022). According to the studys findings, there are positive relationships between intangible assets and financial performance (Longa & Sitorus, 2024). The findings showed that the performance factors, return on assets, and Tobins Q, and the intangibility, degree of intangibility, and intangibility variables all had a substantial and positive association (Sundaresan Mohanlingam; Radonić et al., 2021). Some of the few authors discovered a negative correlation between initial assets and profitability (Méndez-Morales et al., 2024). The partial test findings then show that STVA partially yields positive outcomes but is not significant on ROA (Suhadi & Kahfi, 2024). As per reviewing of some related previous literature, the hypothesis can be constituted in the following manner:

H1: There is a significant positive relationship between expenses in intangible assets and return on assets

Expenses in intangible assets and return on equity (ROE)

In the prior studies, a several scholars have detected the findings that the impact of intangible assets on ROE is showing 31% when goodwill is included and 34% when it is not (Nunes et al., 2018). The influence of intangible assets on ROE is positive association (Lehenchuk et al., 2022). The study found a strong correlation between human capital and earnings per share (EPS) was discovered (Ofurum et al., 2023).

H2: There is a significant positive relationship between expenses in intangible assets and return on equity

Expenses in intangible assets and earnings per share (EPS)

In the earlier studies, some scholars have identified that the return on equity and earnings per share (EPS) were positively and significantly impacted by intangible assets. (Cletus Oluwadare Ebe). The study found a strong correlation between return on asset (ROA) and structural capital. Additionally, a strong correlation between human capital and earnings per share (EPS) was discovered (Ofurum et al., 2023). The results show that IC has a significant positive or negative impact on a number of financial performance (FP) indicators measuring earnings per share (EPS) in conjunction with its sub-elements of human capital (HC) capital employed (CE), structural capital (SC), and relational capital. Moreover, the combined IC has a significant and positive effect on ROA and ROE when measured using the MVAIC (Barak & Sharma, 2024). According to value relevance, the study shows a strong positive correlation between intangible assets and profits quality in Qatar and the Kingdom of Saudi Arabia (AL-ANI & TAWFIK, 2021). The findings demonstrate that, across the majority of the measures and years examined, businesses with a strong intangible component demonstrated better economic performance. Furthermore, while the signed rank sum mean values of intangible-intensive companies are often greater than those of tangible intensive companies, they did not find statistically significant effects for EPS (Almeida Aguiar & Pinto Figari, 2021).

H3: There is a significant positive relationship between expenses in intangible assets and EPS

Conceptual framework of the study

Fig. 1: Conceptual Framework of the study.

Objectives of the study

The specific objectives of the study are as follows:

1. To examine the status of expenses in intangible assets and profitability of pharmaceuticals companies in Bangladesh.
2. To assess whether there is any variation in profitability between pharmaceuticals companies over study periods. 
3. To investigate the impact of expenses in intangible assets on financial performance of publicly traded pharmaceuticals companies in Bangladesh.

Sample Selection, study periods & sources of data

Pharmaceutical companies are listed in Dhaka Stock Exchange (DSE) under the category of “Pharmaceutical and Chemical Company”, thus only 15 listed pharmaceutical companies are considered instead of all for sample selection. Among these 15, 12 (.80 to population) are selected randomly for this study. Four (4) sample companies out of 12 did not publish information about their intangible assets, so, these four companies are excluded.  A period of 5 years ranging from 2019-2023 has been selected for the present study. Secondary sources of data including annual reports sample company; websites of companies, published books; Rules and acts of regulatory bodies; published and unpublished PhD and M.Phil. dissertations are taken into consideration.

Dependent and independent variables 

To attain the objective of this study, profitability measures are used as dependent variables and expenses in IA, Covid 19 and firm size (total assets) are used as independent variables. To secure reliability of data, several statistical tools such as average, standard deviation, minimum, maximum, kurtosis, skewness, correlation, regression have been used for analyzing the data and testing the hypotheses. Moreover, the different charts are used to present the data for easy understanding.

Measurement of   used variables 

Table 1: Showing the operational definition of the variables of the study.

Statistical analysis

In order to examine the relationship between expenses in intangible assets and firm performance, the following model is developed:

Y(ROA) = α + β1Exp_AI + β2 Covid_19  + F_Size +  ε…… Model -1

Y(ROE) = α + β1Exp_AI + β2 Covid_19  + F_Size +  ε…… Model -2

Y(EPS) = α + β1Exp_AI + β2 Covid_19  + F_Size +  ε…… Model -3

Where

Exp_AI, is the expenses in Intangible assets for ith firm at time t,

Covid_19, is  ith firm at time t, 

F_size is the firm size proxied by total assets for ith firm at time t,

α is the intercept, βi is the regression coefficient and ε is the error term,

The subscript i represents the different firms and t represents the different years.

Descriptive Statistics of the variables

Table 2: Showing the descriptive statistics of the variables of the study.

The descriptive analyses indicate that the study acquired secondary data from the financial statement of the company which covered the 5 years between from 2019 to 2023 considering forty observations in total. The mean values of the dependent variables on average, 7.8%, 11.38%, and 63.05% respectively for ROA, ROE, and EPS. The range of the numbers of observations for ROA reached 0.00% to 19%, whereas the range for ROE was from 1% to 26% and EPS was from 7% to 193.9%. The dependent variables, ROA, ROE, and EPS possessed standard deviations of 5.27% 7.23% and 64.24%, in that sequence. In the light of the normal distribution, the observations for each of the dependent variables were distributed higher than .05273 standard deviations on either side of the dependent variable mean, respectively. The independent variables depict on an average 67.64% and 23.25% for Intangible expense and total assets (TA) variables. The intangible expense displayed the highest to lowest observation, as shown by 3.66E8 to 0.00 together with standard deviation of 1.136. With the same concerns, the total assets showed higher to lower observation, as shown by 9.75E10 to 1.29E1 while the standard deviation of 1.136. Skewness and kurtosis are used to test the normality of data. Data 

distribution, either a high skewed or high kurtosis nature implies non-normality which has random effect on estimation. At the earlier stage, descriptive statistics analysis of dependent and independent variables was conducted through mean analysis, and it was figured out that kurtosis scores are (<3) for all variable showed in the above table and it is figured out that all skewness statistics are below ±2 (Hair et al., 2011). So, it can be said that data are normally distributed in this study.

Correlation matrix

The Pearson Product Moment Correlation was employed by the researcher in Table 3. In accordance with the results of the above table the study examines the relationship between total assets, intangible expenses and return on assets using correlation analysis. The results of the study determined that the correlation factor 0.342 indicated a positive association between ROA and total assets. Besides, a correlation coefficient of 0.317 indicates that the study also discovered a positive association between ROA and intangible expenses. According to the results of the above table the study examines the relationship between total assets, intangible expenses and return on equity using correlation analysis. 

Table 3: Showing the correlation matrix of the variables.

The results of the study determined that the correlation factor 0.184 indicated a positive association between ROA and intangible expense. Moreover, a correlation coefficient of 0.141 indicated that the study also discovered a positive association between ROA and intangible expenses. As stated by the results of the above table the study examines the relationship between total assets, intangible expenses and Earnings per Share (EPS) using correlation analysis. The results of the study determined that the correlation factor 0.482 indicated a positive association between EPS and total assets. Furthermore, a correlation coefficient of 0.482 indicated that the study also discovered a positive association between ROA and intangible expenses. The result exhibits that correlation among variables is statistically significant, whereas the correlations are not too high to flag multicollinearity issues

Companys expenditure on intangible assets creation

Based on the above findings, the Beximco and Square co. is on the top in incurring average expenditure in intangible assets (tk. 316248382 4 & 175885036.4). Conversely, Orion Company has the lowest average number of expenses incurred at 1177970.8. Though Indo-Bangla and Ibnesina have dramatically incurred the same amount, the Slico and Advent companies have not spent the same amount of money on intangible assets.

Table 4: Showing the average expenditure in intangible assets.

Profitability status

Return on Assets (ROA)

The eight pharmaceutical companies in Bangladesh that are maturing quickly are highlighted in this bar graph. The horizontal axis exhibits the number of companies, while the vertical axis exhibits the earnings of profit. Based on the bar chart provided, Square Companys greatest average profit-generation amount was 17.77%. Conversely, Orion has the lowest average number of profit generation at 1.96%. The Ibnsina company has indicated the 3rd highest profit showing 12.43%. In case of Beacon company, it has risen to 5.99% but Slico has fallen a little, displaying 3.60%. The Beximco and Advent have upgraded positive way 7.50% and 8.11% (Fig. 2).

Fig. 2: Showing the status of return on assets during the study years.

Return on Equity

In this section, the study shows the profitability proxied by measuring ROE. The Ibnsinas highest average profit was generated tk.24.19%. Conversely, Orion Company has the lowest average number of profits generated at 3.96%. The Square Company has indicated the 2nd highest profit flows is 18.92%. Though the Beximco and Advent upgraded forward 11.39% and 10.64% than the Orion, Slico and Indu-Bangla indication of 3.96%, 4.49% and 6.86% respectively (Fig. 3). 

Fig. 3: Showing the status of return on equity during the study years.

Earnings per share

Based on EPS, the Squares highest average profit was generated tk. 16.054. Conversely, The Indu-Bangla Company has the lowest average number of profits generated at 0.846. The Ibnsina Company has indicated the 2nd highest profit flow is 15.55. Though the Beximco has upgraded to 9.734 but the Beacon, Slico and Advent showed a very few levels of 2.432, 1.064 and 1.368 respectively (See Fig. 4).

Analysis of Variance (ANOVA)

In this section, the mean variation among the sample banks and over the study periods relating to profitability metrics are presented by applying analysis of variances. Firstly, the difference in profitability among the banks is analysed (Table 5 & 6). 

Variation of profitability during the study periods (2019-2013) 

Table 5 shows the ANOVA result, and it is seen that there is no significant variation in profitability among the study periods as the p values are greater than 0.05 (95 % confidence interval).

Fig. 4: Showing the status of earnings per share during the study years.

Table 5: Showing the variation of profit indicators among the study periods.

Variation of profitability among the sample companies

Table 6 presents the ANOVA results and seen that there is statistically significant differences in profitability indicators based on sample companies (Table 6).

 

Table 6: Showing the variation of profit indicators based on sample companies.

Impact of expenses in intangible assets on profitability

The researcher can ascertain how variations in the independent variable impact the dependent variable by considering the adjusted R squared coefficient of determination. From Table 7, the results show that the adjusted R squared value of. 0.376, 0.201 & 0.273 in the regression model 1, II & III respectively.  Based on the ANOVA statistics described in the above table, the population parameters processed data had a significance level of 0.135. It suggests that that the data is suitable for arrival at findings regarding the population parameter because the p-value (or significance value) is lower than 10%. The result showed that intangible expenses did not considerably affect the financial performance (ROA) of sample companies as the computed value F=1.973 only. Thus, intangible assets have no significant impact on return on assets. Similar results have come from model II & III.

Table 7: Showing the regression results.

The control variables of this study show the negative consequences of COVID-19 on the profitability of pharmaceuticals companies in Bangladesh. The COVID-19 pandemic significantly impacted profitability across various industries due to disrupted supply chains, reduced consumer spending, operational challenges, market uncertainty, and sector-specific downturns. However, government support, digital transformation, operational adjustments, and innovation have played crucial roles in mitigating these impacts and aiding recovery efforts.

The objectives of the study are to present the current status of expenses in intangible assets and profit-ability of pharmaceuticals companies in Bangladesh. Besides, the significant variation in profitability among the sample companies and the years of study are also investigated. The association between expenses in intangible assets and profitability is examined using OLS regression technique. The study finds that the mean values of the dependent variables for ROA, ROE, and EPS are on average, 7.8%, 11.38%, and 63.05% respectively. The expenses in intangible assets among the sample banks range from 316248382.4 to 1177970.8. The ANOVA statistics tells that there is no significant variation in profitability in pharmaceuticals industry in Bangladesh year to year but there is statistically significant difference in profitability proxied by ROA, ROE and EPS among the sample companies during the study periods. It is seen that 66.67 % companies in pharmaceuticals companies in Bang-ladesh incur expenses on intangible assets and surprisingly more than 90% expenses on intangible assets are incurred by two companies namely Sqaure Company and Beximco Company. The regression results show that there is no significant association between expenses on intangibles assets and profitability of sample banks during the study periods. The paper finds that expenses in intangible assets not significantly affect the profitability of listed pharmaceutical firms in Bangladesh. It was discovered that having more intangible assets correlated insignificantly with profits-based measures like return on assets, return on equity, and earnings per share. Particularly, businesses investing more in intangible resources tended to perform financially better, signaling the paramount importance of such assets in boosting benefits and securing an edge over competitors. However, variations were seen in the impacts of intangible assets across organizations of different sizes and ages, with larger, more established companies exhibiting a more pronounced link between these resources and superior results. Besides, during data collection through annual report we also find out that pharmaceutical companies measure intangible assets consistently by using cost model. Intangible assets are initially capitalized at cost which include purchase price and other directly attributable costs. It is subsequently carried at cost less accumulated amortization and any accumulated impairment losses. No doubt the intangible assets require huge investments, and the future benefits derived from it are enjoyed after many years. But intangible assets have been seen as critical drivers for knowledge creation, innovation and economic growth. This implies that companies should invest in intangible assets to stand for the gain. Further, the growth of technological firms like pharmaceutical industry relies on its opportunities to exploit innovative products and services, branding as well as intellectual capital; thus, forcing them to strongly invest in intangible assets. Despite the significant academic and practical contribution, the study suffers some limitations. We only take 12 company and 5-year period which is very small as a sample size. It was quite difficult to expand the time frame for this study. Moreover, it was restricted to access the annual report of few company. The crucial limitation was that most of the company did not disclose the intangible assets in their annual report. Therefore, we could not conduct a meaningful and comprehensive analysis on total industry. In future, further research is recommended to examine this relationship in other industries beyond pharmaceutical companies to see if the results are similar. Besides, the research can also be expanded to compare relationships in this industry with other ASEAN countries to gain further insights.

The project was initiated by M.S.H.: who also added the key intellectual ideas. He carefully oversaw and guided all of the work. A.A.S.: develops the studys approach after analysing the data that was gathered. In specifically, B.P.: helped with the sample selection and necessary data collection procedure. The primary author of the finished manuscript was D.M.T.: Each author contributed to the final manuscript and discussed the findings.

We thank our colleagues from the Department of Accounting and Information Systems, University of Rajshahi, Bangladesh for their valuable contri-butions in providing their expertise and insightful opinion that greatly assisted the research though they may not agree with all the interpretations of this paper. Besides, Authors also acknowledge anony-mous reviewers and the journal editor for their thoughtful suggestions and comments which helps to improve the manuscript. 

There is no conflict of interest.