Intellectual capital components and industrial firm’s performance

Abstract

The study aims to determine the connection between intellectual capital (IC) and financial performance of the Jordanian industrial listed companies. The methodology uses regression models, the IC will be measured using the VAIC model (value-added intellectual coefficient), on the other hand, company performance will be measured using return on equity (ROE). The main model includes financial leverage as a control variable to study the leverage role in the association between IC and return on equity. The study also investigates the incremental information content for intellectual capital components in explaining the change in firm performance. In addition, the size effect is studied to show if the company’s size affects the link between ROE and IC. The sample for this study is 77 Jordanian industrial firms and 788 company-year observations during the period 2006–2020. The study results are as follows: Intellectual capital has an important influence on industrial firm performance; Intellectual capital components have a significant impact on industrial firm performance. In particular, human capital efficiency (HCE) and capital employed efficiency (CEE) have a positive influence on ROE, and structural Capital efficiency (SCE) has a negative impact on firm performance. Lastly, firm size has an effect on the relationship between IC and industrial company performance.

The effect of human capital and structural capital on leverage: Evidence from Jordan

“…Human capital and structural capital have been widely recognized as important determinants of firm performance in the literature (Hitt et al, 2019). The reason for selecting the industrial sector is its unique characteristics (Shubita, 2022). The human capital impact on company performance has been extensively studied (Tamunomiebi & Kalio, 2019 Becker (2009), investment in human capital can lead to higher productivity and improved performance.…”

Intellectual Capital Efficiency and Corporate Performance in Jordanian Listed Companies

“…Another approach for defining IC through the new perspective of value creation e.g., from relying on traditional material capital to relying on knowledge, technology and innovation, thus, IC can be defined as the sum of unique knowledge assets that a firm owns or control to create high value and to promote economic growth (Si, 2019). In summary, IC contains skills and knowledge inside a firm as a vital resource in the current economy (Shubita, 2022).…”

“…shows that the impact of IC on ROE is significantly positive at the 1% level, thereby supporting hypothesis H1 on the importance of IC for corporate performance as reflected in the ROE. Previous research both confirms this evidence (e.g.,Xu et al, 2022;Shubita, 2022;Tarigan et al, 2019;Nadeem et al, 2018;Nuraini et al, 2018;Tasawar & Roszaini, 2017;Murwaningsari & Ardy, 2018;Isanzu, 2016;Gogan et al, 2016;Ozkan et al, 2017;William et al, 2017) and contradicts it (e.g., AlMomani & Nour, 2019;Vladimir et al, 2016;Radic, 2018).…”