Abstract
This study contributes to the intellectual capital (IC) area of literature by investigating the impact of IC on the firm’s financial performance of two main sectors in the Bahrain Bourse, financial and service sectors, during five years, 2013–2017. The study employs canonical correlation analysis as a unique statistical method to analyze data gathered from 29 sampled companies, representing 145 firm-year observations over the five years. Two groups of variables are employed. The first represents the firm’s financial performance with two variables (return on equity – ROE and return on assets – ROA), while the second includes three intellectual capital components, namely human, customer, and structural capital. Findings related to the financial sector reveal that all IC components (human capital, customer capital, and structural capital) have positive correlations with firm performance except for the labor costs variable (the sub-variable of human capital), which has a negative correlation with firm’s performance. Human capital is also found to be the most significant component of the IC, while structural capital is reported as the lowest effect on the firm’s performance, consistent with some previous research findings. Furthermore, the services sector results revealed that IC is significantly associated with the firm’s performance. Moreover, two sub-variables of human capital (number of Bahraini employees and labor costs) have the most significant impact on the firm’s performance.
Highlights
The term intellectual capital (IC) has received the most attention of many researchers in various disciplines and practitioners in industrial and economic fields
Because of fairly few published empirical studies directly examining this topic in developing countries, including Bahrain, the research tried to fill the existing accounting literature gap
The findings of the current study revealed that IC has a significant effect on the firm’s performance across the study sample, which supported the study’s main hypothesis in both sectors, the financial and service sectors
Summary
The term intellectual capital (IC) has received the most attention of many researchers in various disciplines and practitioners in industrial and economic fields. The current study empirically investigates the association between IC and FFP for two sectors in the Bahraini capital market (financial and service sectors) using a sample of 29 listed firms in a period of five years, 2013–2017, representing 145 firm-year observations over the five years. Based on the resource-based theory, comprises external relationships with a variety of firms that acquire and effectively manage their incustomers, strategic partners, banks, stakehold- tangible assets (as strategic assets) enjoy competiers, suppliers, market channels, government, and tive advantages (Spender, 1996) Such advantages business networks, reflecting customers’ percep- are raised from the use of intangible, scarce, and tions of the firm.
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Free) 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
