The Nexus between Intellectual Capital and Value of the Firms: A Study on BSE S&P IT Firms in India

Abstract

Purpose: This paper examines the nexus between Intellectual Capital and Value of Information Technology Firms in the Indian Information Technology Industry. Forty-five companies, listed on BSE S&P IT Sector, were taken as a sample, for the purpose of this study.

Methodology: Value Added Intellectual Co-efficient (VAIC) method, as developed by Pulic (1998) and Granger Causality, was used for the evaluation of intellectual capital and its relationship with the value of sample companies.

Findings: The result of the study supports the hypothesis that the value of firms could be explained by the intellectual capital. It is found that there was significant association between intellectual capital and the value of sample firms.

Practical Implication: The corporate are to be suggested to concentrate more on human capital efficiency. Besides, the Government officials, policy makers and other stake holders are advised to urge the corporate disclosure practices.

Keywords: Intellectual Capital, IT Sector, Value of Firms, Value Added Intellectual Co- Efficient (VAIC)

JEL Classification: 034, E24, J24, G32