Asian Journal of Management

Open Access Open Access  Restricted Access Subscription Access
Open Access Open Access Open Access  Restricted Access Restricted Access Subscription Access

Intellectual Capital and its Association with Profitability and Market Valuation in Indian IT Sector


Affiliations
1 Department: Department of Commerce, College: Sri Venkateswara College, University of Delhi, New Delhi-110021, India
2 Department: Mittal School of Business, College: Mittal School of Business, Lovely Professional University, Phagwara, Punjab-144111, India
     

   Subscribe/Renew Journal


This study examines the relationship of intellectual capital with profitability and market valuation of Indian information technology sector for a period of 10 years from 2006 to 2015 by collecting data from CMIE prowess database. The Value Added Intellectual Coefficient (VAICTM) method has been employed for measuring the intellectual capital of the companies. Correlation and panel regression has been applied in this study for analyzing the relationship between variables. It has been found from the study that intellectual capital in IT sector has significant impact on profitability of the companies. The analysis also found that intellectual capital has no role to play in increasing the market valuation of the companies. The findings indicate that investors consider only financial disclosure of the companies regarding their investment decision. The study provides useful knowledge to the researchers and managers regarding IC and its relation with financial performance.

Keywords

Intellectual Capital, Information Technology Industry, Profitability, Market Valuation and India.
Subscription Login to verify subscription
User
Notifications
Font Size


  • Ahangar, RG. The relationship between intellectual capital and financial performance: an empirical investigation in an Iranian company. African Journal of Business Management, 2011; 5(1): 88-95.

  • Bontis, N. Intellectual capital: an exploratory study that develops measures and models. Management Decision, 1998; 36(2): 63-76.

  • Chen, M, Cheng, S, Hwang, Y. An empirical investigation of the relationship between intellectual capital and firms’ market value and financial performance. Journal of Intellectual Capital. 2005; 6(2):159-176.

  • Deep, R, Narwal, KP. Intellectual capital and its association with financial performance: A study of Indian textile sector. International Journal of Management and Business Research, 2014; 4(1): 43-54.

  • Edvinsson, L. Developing intellectual capital at Skandia. Long Range Planning. 1997; 30(3): 366-373.

  • Edvinsson, L, Malone, MS. Intellectual Capital: Realizing Your Company’s True Value by Finding Its Hidden Brainpower. Harper Business, New York, NY. 1997.

  • Ghosh, S, Mondal, A. Indian software and pharmaceutical sector IC and financial performance. Journal of Intellectual Capital, 2009; 10(3): 369-388.

  • Komnenic, B, Pokrajcic, D. Intellectual capital and corporate performance of MNCs in Serbia. Journal of Intellectual Capital, 2012; 13(1): 106-119.

  • Lev, B. Intangibles: Management, and Reporting. Brookings Institution Press, Washington, DC. 2001.

  • Mehralian, G, Rajabzadeh, A, Sadeh, MR, Rasekh, HR. Intellectual capital and corporate performance in Iranian pharmaceutical industry. Journal of Intellectual Capital, 2012; 13(1):138-158.

  • Pal, K, Soriya, S. Financial reporting of intellectual capital and company’s performance in Indian information technology industry. International Journal of Asian Business and Information Management, 2011; 2(2): 34-49.

  • Rehman W, Rehman C, Rehman H, Zahid A. Intellectual capital performance and its impact on corporate performance: An empirical evidence from Modaraba sector of Pakistan. Australian journal of business and management research, 2011; 1(5): 8-16.

  • Sullivan, PH. Profiting from Intellectual Capital, Extracting Value from Innovation. John Wiley, New York, NY. 1998.

  • Tan, HP, Plowman, D, Hancock, P. Intellectual capital and financial returns of companies. Journal of Intellectual Capital, 2007; 8(1): 76-95.

  • Usoff, C, Thibodeau, JC, Burnaby, P. The importance of intellectual capital and its effect on performance measurement systems. Managerial Auditing Journal, 2002; 17(1/2): 9-15.


Abstract Views: 181

PDF Views: 0




  • Intellectual Capital and its Association with Profitability and Market Valuation in Indian IT Sector

Abstract Views: 181  |  PDF Views: 0

Authors

Raman Deep Singh
Department: Department of Commerce, College: Sri Venkateswara College, University of Delhi, New Delhi-110021, India
Rashid Shamim
Department: Mittal School of Business, College: Mittal School of Business, Lovely Professional University, Phagwara, Punjab-144111, India

Abstract


This study examines the relationship of intellectual capital with profitability and market valuation of Indian information technology sector for a period of 10 years from 2006 to 2015 by collecting data from CMIE prowess database. The Value Added Intellectual Coefficient (VAICTM) method has been employed for measuring the intellectual capital of the companies. Correlation and panel regression has been applied in this study for analyzing the relationship between variables. It has been found from the study that intellectual capital in IT sector has significant impact on profitability of the companies. The analysis also found that intellectual capital has no role to play in increasing the market valuation of the companies. The findings indicate that investors consider only financial disclosure of the companies regarding their investment decision. The study provides useful knowledge to the researchers and managers regarding IC and its relation with financial performance.

Keywords


Intellectual Capital, Information Technology Industry, Profitability, Market Valuation and India.

References