The Impact of Intellectual Capital Efficiency on Financial Performance in the Indian Auto - Component Industry

Authors

  •   Anthony Thiagarajan Research Scholar, Department of Management, Birla Institute of Technology (BIT), Mesra, Ranchi - 835 215, Jharkhand
  •   Utpal Baul Professor, Department of Management, Birla Institute of Technology (BIT), Mesra, Ranchi - 835 215, Jharkhand
  •   J. Sekkizhar Assistant Professor - Decision Sciences, PSG Institute of Management, Coimbatore - 641 004, Tamil Nadu

DOI:

https://doi.org/10.17010/ijf/2018/v12i3/121995

Keywords:

Intellectual Capital

, Value Added Intellectual Coefficient (VAICTM), Modified Value Added Intellectual Coefficient (M-VAIC), Linear Multiple Regression (LMR), Structural Equation Modeling (SEM), Value Add (VA)

C12

, L21, L62

Paper Submission Date

, December 20, 2017, Paper sent back for Revision, January 13, 2018, Paper Acceptance Date, February 14, 2018.

Abstract

Purpose : The purpose of this paper was to study and discover the financial health of a company by measuring the relationship between the intellectual capital (IC) components with the traditional measures of organizational performance - financial, economic, and stock market.

Design/Methodology/Approach : Using data from a sample of 42 listed companies from the Indian auto-component industry for the period from 2008 - 2013, this study applied the most attractive IC measurement model known for its practical and empirical validity (Zeghal & Maaloul, 2010). This measurement methodology is called the modified Value Added Intellectual Coefficient (M-VAIC) propounded by Nimtrakoon (2015). This is an optimized framework that improvises the popular and widely - used Value Added Intellectual Coefficient (VAICTM ) model of Pulic (2000, 2004, 2008) as addition of new variables to the VAICTM model improves its explanatory power.

Findings : The Indian auto component manufacturing companies seemed to be performing effectively by utilizing their IC as seen by the empirical results during the period from 2008 - 2013 in spite of the economic recession of 2008 and its aftermath.

Research Limitations/Implications : The results suggested that stakeholders still perceive the performance of firms in terms of tangible assets as the sole driver of organization success and less in terms of IC. This opens up avenues for further discovery/ findings to prove/disprove the same in other industries.

Practical Implications : There is an imperative need for researchers, academics, business practitioners, and policy makers to get aware of IC and pitchfork it into the core of business. This study would benefit all stakeholders to achieve financial performance.

 

Originality/Value : This is one of the pioneering attempts to measure IC and its relationship with the traditional measures of corporate performance in the Indian auto - component industry. This paper added to the existing literature by providing a new dimension of performance measurement.

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Published

2018-03-01

How to Cite

Thiagarajan, A., Baul, U., & Sekkizhar, J. (2018). The Impact of Intellectual Capital Efficiency on Financial Performance in the Indian Auto - Component Industry. Indian Journal of Finance, 12(3), 7–29. https://doi.org/10.17010/ijf/2018/v12i3/121995

Issue

Volume 12, Issue 3, March 2018

Section

Articles
Crossref
Scopus
Google Scholar
Europe PMC

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