Intellectual Capital Efficiency and Financial Performance of IT Companies in India: A Panel Data Analysis

Abstract

This study analyzes the effect of Intellectual Capital Efficiency on firm performance of IT companies in India. NSE-IT index, consisting 10 IT companies was chosen for the study, the ICE was gauged using Value Added (VA) and Value Added Intellectual Coefficient (VAIC TM ). The study uses secondary data for 10 years from 2007 to 2016 and empirically analyses the relationship of VA, VAIC TM and the components of VAIC TM with Firm performance indicators (ROA, ROE and NPM) of IT sector. The result of the study reports the presence of a positive relationship among both VAIC TM and VA with firm performance indicators. The presence of relationship between components of VAIC TM and financial performance indicators shows a positive relationship of Value Added Structural Capital (STVA) with ROA and Net Profit Margin (NPM) but a negative relationship with ROE. Value Added Human Capital (VAHC) shows positive relationship with ROA and negative relationship with ROE. Value Added Capital Efficiency shows no significant relationship with any of the Performance measures.