Intellectual capital and firm performance: evidence from the financial sector in Bangladesh

Abstract

The paper aims at investigating the effect of intellectual capital (IC) on the performance of financial institutions in Bangladesh. Quantitative data are collected from 49 financial institutions listed in the Dhaka Stock Exchange (DSE) for the year ending 2012 and 2013. IC is measured using Value Added Intellectual Coefficient (VAIC) developed by Pulic (1998). The impact of both the current and past years' VAIC on firm performance is measured, along with the effects of its three components - human capital efficiency (HCE), capital employed efficiency (CEE), and structural capital efficiency (SCE). The stepwise regression results indicate a positive and significant relationship between current year VAIC and two measures of firm performance (ROA, ROE) while past years' VAIC is found insignificant for all three measures of firm performance. HCE for the current year is found to be the most significant contributor toward firm performance among all the three components of VAIC, having a substantial positive relationship with all three measures of firm performance. SCE of the current year significantly affects ROA and ROE whereas CEE is found to be significant only for ROA. While measuring past years' effect on performance, only HCE has been found to have a negative influence on current year's revenue growth (RG).