An Empirical Study of the Impact of Intellectual Capital on the Financial Performance of Indian IT Sector

Journal of Corporate Finance Research, Vol. 12, No. 1, pp. 7-19, 2018

13 Pages Posted: 3 Apr 2019

See all articles by Musa Khan

Musa Khan

Aligarh Muslim University (AMU)

Multiple version iconThere are 2 versions of this paper

Date Written: 2018

Abstract

In the present scenario, intellectual capital has been established as an important corporate asset because conventional performance measurement techniques are incapable of measuring the intangible dimensions of corporate performance. It is a challenge, especially for knowledge driven firms, to measure the impact of intangibles on their financial performance. The main objective of this study is to show the impact of intellectual capital on the financial performance of the Indian IT sector. In order to conduct the study, the sample was drawn from the IT sector for which the sector index of BSE, namely the BSE IT, had been selected. In all, data from 51 companies from the Information Technology (IT) sector for the financial years ranging from 2006 to 2016 were taken. The data used in this study was extracted from the CMIE’s Prowess.

The VAICTM was used to measure the intangibility of these firms. The results show thatonly the VAICTM had a significant positive association with profitability of the Indian IT sector, while it had an insignificant relationship with productivity and market valuation. The CEE had a significant positive relationship with productivity and profitability in the IT sector, while, in the case of market valuation, it had an insignificant impact. The HCE had aninsignificant impact on profitability and productivity, while, in the case of market valuation, it had a negative significant impact. The SCE had a significant positive association with market valuation only while it had an insignificant relationship with the productivity and profitability of the Indian IT sector.

Keywords: Intellectual Capital, Financial Performance, Value Added Intellectual Coefficient™, Capital Employed Efficiency, Human Capital Efficiency, Structural Capital Efficiency, Profitability, Productivity, Market Valuation

JEL Classification: C1, C4, C5, G3, Z0

Suggested Citation

Khan, Musa, An Empirical Study of the Impact of Intellectual Capital on the Financial Performance of Indian IT Sector (2018). Journal of Corporate Finance Research, Vol. 12, No. 1, pp. 7-19, 2018. Available at SSRN: https://ssrn.com/abstract=3346276

Musa Khan (Contact Author)

Aligarh Muslim University (AMU) ( email )

Chelamala
Perinthalmanna
Aligarh, Uttar Pradesh 202002
India

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