Measuring the Impact of Intellectual Capital on the Financial Performance of the Finance Sector of India

In the current scenario, intellectual capital has been recognised as a vital corporate asset because the conventional performance measurement techniques are incapable of measuring intangible dimensions of corporate performance. It is a challenge, especially for knowledge-driven firms, to measure the impact of intangibles on their financial performance. This study tries to explore the impact of intellectual capital on the financial performance of knowledge-driven firms of India. For conducting the study, Bombay Stock Exchange’s finance index has been taken for a period ranging from 2009 to 2018, and the Value Added Intellectual Coefficient (VAIC™) methodology has been used to measure the intangible aspects of these firms. The results reveal that Value Added Intellectual Coefficient has an insignificant association with the profitability and productivity of the sample companies. While among the components of Value Added Intellectual Coefficient, the capital employed efficiency has a significant positive relationship only with the profitability of the financial sector. In the case of productivity, all the components of intellectual capital have an insignificant effect on the financial companies of India. The SCE remain insignificant for all the financial performance measures, whereas human capital efficiency is substantial only for enhancing the return on assets of the sample companies.