Impact of Intellectual Capital on Financial Performance

PurposeNowadays despite the increasing importance of intangible assets, especially intellectual capital in the companies; the majority of the traditional accounting systems are unable to calculate the intellectual capital properly. The purpose of this study is to examine the relationship between intellectual capital and financial performance. Design/methodology/approach – The empirical data were drawn from a panel consisting of 49 Iranian companies listed in the Tehran Stock Exchange (TSE), classified in three different industrial sectors observed over the ten-year period of 2001 to 2010. Various regression models were examined in order to test the hypotheses included in the proposed conceptual framework. Research limitations/implications – The lack of available data for the appropriate analysis; the investigation of tree industrial sectors and are the main limitations of the present study. FindingResults demonstrate that there is significant positive relationship between intellectual capital and value added efficiency of structural capital component with the three financial performance measures (ROE, ROA, GR). Moreover, results indicate that that there is significant positive relationship between value added efficiency of capital employed and value added efficiency of human capital with two independent variables ((ROE, ROA) and there is no significant relationship between value added efficiency of capital employed and value added efficiency of human capital with growth revenue (GR). Practical implications – Results proved that, in the business context, the organization can achieve sustainable value with investment on intellectual capital and with focusing on intellectual capital; they can move from the economy based on the tangible assets towards economy based on the intangible assets. International Journal of Academic Research in Economics and Management Sciences January 2013, Vol. 2, No. 1 ISSN: 2226-3624 7 Originality/value – The results of this study can illuminate the role and importance of intellectual capital to improve financial performance for companies and also the results of this study can be used by shareholders and investors.