Intellectual capital and firm performance: the moderating effect of controlling shareholders in Malaysia

Abstract

This study examines: 1) how intellectual capital (IC) investment nonlinearly affects firm performance; 2) how controlling shareholders moderate the nonlinear association between IC investment and firm performance. This study utilises the value-added intellectual coefficient to proxy for the efficiencies of IC and its components, namely, human capital, structural capital and capital employed. Panel regression analysis is conducted utilising data from 733 Malaysian public listed companies for the period 2009-2018. The positive effects of intangible components of IC investments vanish after a certain optimal breakpoint. Regression results also indicate that controlling shareholders moderate the nonlinear impacts of IC and component investment on firm performance except for human capital efficiency. This study is the first to examine the role of controlling shareholders in moderating the relationship between IC investment and firm performance with a joint investigation of controlling shareholders, IC, and firm performance.