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Intellectual capital performance during financial crises

Sampath Kehelwalatenna (Department of Accounting, University of Colombo, Colombo, Sri Lanka)

Measuring Business Excellence

ISSN: 1368-3047

Article publication date: 15 August 2016

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Abstract

Purpose

This paper aims to examine empirically the behaviour of the impact of intellectual capital (IC) on firm performance during financial crises, having observed that there was no prior research carried out to examine whether the theoretically expected sustainable firm performance created by IC holds during a financially unstable situation in the economy.

Design/methodology/approach

The Pulic’s value-added intellectual coefficient method is used to measure IC. Firm performance is measured through productivity, profitability and revenue growth. Structural stability tests and dynamic regression models for panel data are used for the data of 191 banking firms listed on the New York Stock Exchange during 2000-2011.

Findings

The paper reveals, contrary to theoretical expectations, that the impact of IC on firm performance is inconsistent during financial crises. This behaviour emerges mainly because of the incapability of human capital, the main component of IC, to create value for the sample firms during financial crises.

Research limitations/implications

The findings of the study are confined to financial crises that existed in the US economy during the period 2000-2011. The findings provide evidence that heterogeneity in the resource base of a firm plays a very minor role in the value creation process during turbulent economic situations. The findings also question the practicality of investing in intangible assets, including IC, during periods of financial crises.

Originality/value

This paper could be the first attempt to evident empirically that the heterogeneity in the resource base of the firm has a very minor role to play in the value creation process when instability exists in the macroeconomic environment.

Keywords

Citation

Kehelwalatenna, S. (2016), "Intellectual capital performance during financial crises", Measuring Business Excellence, Vol. 20 No. 3, pp. 55-78. https://doi.org/10.1108/MBE-08-2015-0043

Publisher

:

Emerald Group Publishing Limited

Copyright © 2016, Emerald Group Publishing Limited

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