Financial Reporting of Intellectual Capital and Company’s Performance in Indian Information Technology Industry

Abstract

This paper examines the relationship between Financial Reporting of Intellectual Capital and Company’s Performances in Indian Information Technology Industry. For the purpose of this study, sixty companies listed on NSE were taken for a period of 1999-00 to 2008-09. Value Added Intellectual Co-efficient (VAICTM) method developed by Pulic (1998) was used for the analysis of the data. The present study uses VAICTM model and regression equation for the evaluation of intellectual capital and their relationship with productivity, profitability, and market valuation of the companies. The result of the study supports the hypothesis that profitability of the company can be explained by the intellectual capital. However, there is no significant association of intellectual capital with productivity and market capitalization of the companies for the selected time period of year 1999-00 to 2008-09.

Impact of intellectual capital on financial performance: evidence from the Bangladeshi textile sector

“…Ten long years after the UNCTAD report, the current study found the same underutilisation scenario for IC management in Bangladeshi textile sector. This research outcome is consistent with previous studies on emerging economies (Deep and Narwal, 2014; Dzenopoljac et al , 2017; Firer and Williams, 2003; Khanqah et al , 2012; Pal and Soriya, 2012), in which IC was found to play a minimal role to play in predicting superior financial outcomes. Deep and Narwal (2014) demonstrated a significant and positive influence of VAIC components on profitability and no effect on productivity ratio in the Indian textile industry.…”

“…This result was consistent with later studies by Pal and Soriya (2011); Shaban and Kavida (2013) and Vishnu and Kumar Gupta (2014) in the context of Indian IT industry and pharmaceutical firms. Pal and Soriya (2012) performed a comparative study on the Indian pharmaceutical and textile industries to suggest a positive influence of IC on profitability, but found no significant link between ICE and productivity. Firer and Williams (2003) and Dzenopoljac et al (2017) described limited and mixed outcomes for the association of IC and financial performance in South Africa and the Arab region, respectively, where corporate performance is influenced mostly by physical assets.…”

“…The financial performance indicators considered in this paper are profitability indicators such as ROA and ROE and the productivity indicator, asset turnover (ATO). The selection of these conventional financial indicators was made following usage in previous research (Firer and Williams, 2003; Gan and Saleh, 2010; Joshi et al , 2010; Mondal and Ghosh, 2012; Pal and Soriya, 2012; Ozkan et al , 2016).…”