The nexus of intellectual capital and operational efficiency: the case of Indian financial system

Abstract

The emergence of the knowledge economy has made Intellectual Capital (IC) progressively significant. The aim of the study is to evaluate the impact of intellectual capital on operational efficiency calculated using Stochastic Frontier Analysis (SFA) for Indian financial sector companies. The present study has been used data of 64 companies for the time-period of 14 years (2004–2018) listed in National Stock Exchange-500. The paper has used modified Pulic’s Value Added Intellectual Coefficient (VAIC™) as a proxy to measure intellectual capital. Correlation and Dynamic panel regression has been used in order to examine the relationship and address the problems of heteroscedasticity, autocorrelation and endogeneity in the data. The results of the study indicates positive and significant relationship between IC and efficiency of the firm. Also, found that all the components of IC has a significant impact on firms’ efficiency. The outcomes would help the regulatory authorities and management of Indian financial sector in managing and organizing company’s IC.