Abstract
Corporate governance significantly effects corporate performance and this relationship is established through number of studies theoretically and empirically conducted in this field. Also, there are studies which show the relationship between corporate governance and intellectual capital performance. Furthermore, intellectual capital performance positively effects corporate performance as shown in the previous studies. These relationships trigger this study to explore the role of intellectual capital as a mediator between corporate governance and corporate performance relationship. This study focuses on the idea that governance measures, board of directors in this study, can contribute to the intellectual capital efficiency of the companies which in turn results in higher corporate performance. A single structural model of corporate governance, intellectual capital and corporate performance is conceptualized. In the model, board of directors, variables are taken as governance measures, Value Added Intellectual Coefficient (VAICTM) as intellectual capital performance measure and traditional financial measures as corporate performance measures. It is intellectual capital resources which act as mechanism through which the corporate governance is able to influence the corporate performance. Intellectual capital is taken as mediator to confirm that IC properly mediates the CG and performance relationship conceptually. This study will be beneficial for the research community to combine different areas of study under one model. This study will suggest the management and other regulatory bodies to understand the importance of intellectual capital along with governance and performance.
Highlights
Corporate governance is “a system by which companies are directed and controlled” (Cadbury Report 1992: 15)
This study suggests on the foundations of resource dependence theory that different board characteristics (IV) contribute to the intellectual capital (M) of the organization through their expertise, knowledge, experience, broad exposure, relational capital, and gender diversity and intellectual capital lead to higher corporate performance (DV) eventually (Ho and Williams, 2003)
This study uses five corporate governance (CG) measures which can contribute to the intellectual capital (IC) and IC leads to corporate performance
Summary
Corporate governance is “a system by which companies are directed and controlled” (Cadbury Report 1992: 15). Shleifer and Vishny (1997: 737) define corporate governance as “a process in which suppliers of finance to corporations assure themselves of getting return on their investment” This means that companies should generate profit and return this profit back to the shareholders and creditors who supplied finance for the activities of business. Board of directors is responsible to establish effective strategies to acquire and utilize human and structural resources at their best These resources help to improve productions capacities and processes and result in new patent development activities. This paper uses intellectual capital as a mediator which takes its input from the corporate governance measures and yields its output in the form of corporate performance This is the first study to focus three important business areas like CG, IC and performance in mediating relationship
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