Nexus Between Intellectual Capital, Financial Performance and Sustainable Growth: Evidence from the Turkish ICT Industry

Abstract

The paper aims to measure, using the VAIC model, the impact of intellectual capital and its elements on the financial performance and sustainable growth of Turkish ICT companies listed on the Istanbul Stock Exchange (ISE). Panel data regression was used to analyse 31 Turkish ICT companies’ activity for 2019-2022. To measure the relationships between financial performance, sustainable growth and its determinants, sixteen functional models were developed, the formation of which was based on the following types of used dependent variables – Return on Assets, Return on Equity, Return on Sales, Sustainable Growth Rate. Ten independent variables were used, such as VAIC, Modified VAIC, Capital Employed Efficiency, Human Capital Efficiency, Structural Capital Efficiency, Research and Development Capital Efficiency, Relational Capital Efficiency, Leverage, Size, and Dummy Variable for Subbranch. The findings expand the understanding of the importance of intellectual capital management in generating enterprise value and providing sustainable advantages by high-tech companies in the context of forming a knowledge-based economy. The regression analysis of the impact of VAIC and its structural components on Turkish ICT companies’ financial performance and sustainable growth showed rather contradictory results. The most significant effects on the financial performance of Turkish ICT companies and sustainable development are Return on Assets – VAIC, Modified VAIC, Human Capital Efficiency, Research and Development Capital Efficiency, Leverage, Dummy Variable for Subbranch; Return on Equity – Human Capital Efficiency, Leverage; Return on Sales – Human Capital Efficiency, Leverage, Structural Capital Efficiency, Size; and Sustainable Growth Rate – Research and Development Capital Efficiency, Capital Employed Efficiency, Leverage. The expediency of increasing investments in the development of experience and professional skills of employees of Turkish ICT companies, as well as strengthening their innovative activities, which will ensure the growth of their profitability in the short term, have been substantiated.