Impact of Intellectual Capital on Financial Performance and Market Valuation of Firms in India

Abstract

The Objective of this paper is to empirically investigate the impact of intellectual capital(IC) on the financial performance and market valuation of firms in India. Thirty firms from S&P BSE SENSEX index which consists of 30 firms from across various manufacturing and service sectors. The analysis was carried for a period from FY 2008-2009 to 2012-2013. Multiple linear Regression analysis is used to study the impact of IC on financial performance and market value of these select firms. The paper uses the VAIC TM methodology to evaluate the data and finds that the financial performance and market value is indeed influenced by the IC of the firms. This result is crucial for firm’s management and policy makers to make IC disclosure and reporting mandatory in firms accounting statements as the stakeholder can get the real picture of the true value of the firm.