Nexus Between Intellectual Capital and Firm Performance: Evidence from the Indian Fertiliser Industry

Abstract

This study attempts to evaluate the relationship of Intellectual Capital (IC) and its components with the financial performance of fertiliser firms in India. The Modified Value-Added Intellectual Capital (MVAIC) method is employed to quantify Intellectual Capital, and the financial performance is measured through Return on Assets, Return on Equity (profitability indicators) and Asset Turnover Ratio (productivity indicator). The study sample consists of 20 fertiliser firms, and data have been collected for the post-implementation phase of the Companies Act 2013, i.e. 2012-13 to 2021-22. The panel regression (Robust Standard Error method) predicts the relationship between Intellectual Capital, its components and financial performance. The results of the study depict that intellectual capital has a substantial impact on the financial performance of Indian fertiliser firms. Human Capital Efficiency is the most powerful component for predicting the financial performance of fertiliser firms in India. These findings provide valuable insights to policymakers regarding the active utilisation of IC resources for firms' value creation.