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http://dx.doi.org/10.13106/jafeb.2022.vol9.no7.0231

The Nexus Between Intellectual Capital and Financial Performance: An Econometric Analysis from Pakistan  

GUL, Raazia (Department of Management Sciences, DHA Suffa University)
AL-FARYAR, Mamdouh Abdulaziz Saleh (Department of Accounting and Financial Management, Faculty of Business and Law, University of Portsmouth, Economics and Finance)
ELLAHI, Nazima (Department of Economics and Finance, Foundation University)
Publication Information
The Journal of Asian Finance, Economics and Business / v.9, no.7, 2022 , pp. 231-237 More about this Journal
Abstract
Intellectual Capital, a valuable intangible organizational asset, is primarily linked to a company's financial performance and is divided into three categories: human, structural, and relational capital. This paper investigates the impact of intellectual capital on the financial performance of selected Pakistani companies in the Information and Communication sector, as this sector is heavily reliant on intellectual capital. The data for 11 firms was gathered from the State Bank's Financial Statements Analysis of Companies Listed on the Pakistan Stock Exchange from 2015 to 2020. Pulić's (2004) Value Added Intellectual Coefficient (VAICTM) has been used to assess a company's IC efficiency. VAICTM and its components, the efficiency of intellectual capital, and the efficiency of capital employed are calculated. Financial performance is measured through return on assets, return on capital employed, and asset turnover ratio. Multiple regression, fixed-effect, and random-effect Panel Data estimation are used in the empirical study. The findings suggest that intellectual capital efficiency has a large impact on major profitability metrics, but little effect on company productivity. It can be inferred from the results that the companies must invest in advanced technology, the latest machinery, and well-equipped offices to improve financial performance and productivity and gain a competitive advantage.
Keywords
Intellectual Capital; Financial Performance; Panel Data; Value Added Intellectual Coefficient ($VAIC^{TM}$);
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Times Cited By KSCI : 3  (Citation Analysis)
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