IMPACT OF INTELLECTUAL CAPITAL ON CORPORATE FINANCIAL PERFORMANCE: AN EMPIRICAL EVIDENCE FROM PHARMACEUTICAL SECTOR OF PAKISTAN

Abstract

The basic purpose of this study is to analyze the impact of intellectual capital on corporate financial performance. This study is conducted on pharmaceutical sector listed in Pakistan Stock Exchange. Data for this study was collected from audited annual financial statements of selected business organizations over period of ten year i.e. from 2005-2014. Value Added Intellectual Coefficient (VAIC) methodology is employed, in order to measure IC (Intellectual Capital) and its different components. The firm’s financial performance is measured by using profitability measures including ROE (Return on Equity) and ROA (Return on Assets), market to book value and asset turnover. In order to analyze the collected data, the Partial Least Square (PLS), a SEM (structural equation modeling) technique. These approaches are used to assess the measurement and structural models. The results of analysis have supported the proposed hypothesis i.e. there is significant positive impact of intellectual capital on firm’s financial performance among pharmaceutical industries of Pakistan.