The Motivation of Intellectual Capital on Firm’s Financial Performance: Analysis on Financial Sector in Malaysia

Abstract

The intention of this experiential analysis is to explore the stimulus of intellectual capital (IC) on the financial performance of firms itemized in financial sector on Bursa Malaysia Berhad. Scholars regard intellectual capital as a market value creator. In the era of information technology, competitive advantage can only be found through intangible assets (intellectual capital). Nowadays, the factors of production have changed to information and knowledge. Therefore, the execution of Knowledge based Economy (K-economy) is necessary for an improved development and competitiveness. The Malaysian economy of today has changed from a Peconomy which stands for production economy to K-economy whereby the knowledge has been the main key driver. Today, in the k-economy, knowledge is known as one of the primary factors in sustaining economic growth apart from land, labour and physical capital. This study measure IC by the value-added Intellectual coefficient measurement model. Most of the scholars regards finance industry as a knowledge-based industry, thus this industry is encompassed. Hence, it generates it a perfect sector for study on intellectual capital. Knowledge based industries are considered as the strength of the new economy called knowledgebased economy. Economists believe financial sector has a major contribution in long term economic growth and development, also the important pillar for economy.

Value-added intellectual capital and financial performance: evidence from Mauritian companies

“…More recently, focusing on a sample of 93 listed manufacturing firms on the Indonesian stock exchange, Tarigan et al (2019) confirmed the hypothesis that as IC efficiency improves, so will the productivity and profitability, measured by different proxies such as ROA, ROE, revenue growth as well as asset turnover, of the manufacturing firms. Saddam (2020) explored the stimulus of IC on the FP of firms operating within the Malaysian financial sector and his results confirmed that IC exerts both positive and significant relationship on the performance of those firms like banks, insurance and so on. Likewise, this key contribution of intellectual assets on performance indicators like ROA and ROE has been underlined by Desoky and Mousa (2020) within financial and services firms in Bahrain.…”

Intellectual Capital: The Current Affluence of Organizations in Malaysian Banking Industry.

“…Intellectual capital has been accepted as a paramount in the modern knowledge economy (Saddam, 2020). The advancement in the economy has edge the organization to chase for competitive advantage.…”

The Nexus between Intellectual Capital and Firm's Financial Performance: ACE Market Vantage Point

“…It is believed that monitoring and identifying intangible assets highly connected to the determination of failure or success of a firm (Jordão Ricardo Vinícius, Novas, & Gupta, 2019). Therefore, intellectual capital is considered a vital element of the overall performance development of an organization (Saddam, 2020). Also, intellectual capital management is a vital movement that impacts a firm's performance (Maji & Goswami, 2016).…”