The Impact of Intellectual Capital on Financial Performance of Malaysian Construction Firms

Abstract

The aim of this study is to examine the impact of intellectual capital on financial performance of Malaysian construction firms using value-added intellectual coefficient (VAIC) model. The empirical data were drawn from a panel consisting of 41 construction firms listed in Bursa Malaysia and observed over a five-year period of 2011 to 2015. Two regression models were examined in order to test the hypotheses included in the research framework of the study. Intellectual capital is the independent variable in the study and measured by VAIC, HCE, SCE, CEE and the dependent variable, financial performance, is proxy by ROA. The results show that VAIC is positive and significantly associated with ROA. However, on the components of intellectual capital, only CEE is positive and significantly associated with ROA. The concentration on one industry and the relatively narrow five-year period for data collection were the main limitations of this study. The value of this study is the contribution towards intellectual capital literature by expanding into construction firms and such a research is limited.