Interaction beetween Intellectual capital and Financial Performance

Abstract

In the knowledge-based era and intellectual capital (IC) regime, literatures abound on the impact of intellectual capital components on company performance especially in the developed countries. However, only a few scholars have written on this topic in developing countries in general and Nigeria in particular. This study examines the relationship between intellectual capital components and financial performance in Nigeria. Annual reports of sampled companies were analysed using Value Added intellectual coefficient (VAIC) as proposed by Pulic (2000) to measure intellectual capital components in form of Human Capital Efficiency (HCE), Structural Capital Efficiency (SCE) and Capital Employed Efficiency (CEE) based on profitability, productivity and market value of companies’ financial performance. The results of the study show that, relationship exists between intellectual capital components and company financial performance. It was found that human capital and structural capital influence financial performance of the sampled companies more than physical capital employed. This study is the first to empirically examine the entire intellectual capital components and their relationship with companies’ performance in Nigeria. The result of the study provides information on how to value intellectual capital components and serve as guidelines on intellectual capital measurement for Nigerian companies.