Impact of intellectual capital on financial performance: evidence from the Bangladeshi textile sector

Abstract

Purpose

The purpose of this paper is to investigate the influence of intellectual capital (IC) on financial performance and, in turn, to provide insights into its impact on emerging economies.

Design/methodology/approach

Data were collected from 34 textile firms in Bangladesh between 2013 and 2017. The IC efficiency, through value-added intellectual coefficient (VAIC) model, and its impact on financial performance, through return on assets (ROA), return on equity and asset turnover (ATO), was examined using descriptive statistics and multiple regression techniques. The analysis is based on secondary data obtained from annual reports.

Findings

The results indicate the impact of VAIC components on financial performance and also demonstrate diverse relationships with changes in financial indicators. The VAIC components significantly influenced productivity outcomes, with tangible capital playing a major role in both productivity and profitability. Moreover, it was found that structural capital had a considerable effect on ATO and ROA with human capital indicating an insignificant impact on all financial performance indicators.

Research limitations/implications

The research outcome is specific to the textile industry in emerging economies. The study may guide future research on IC performance in textile firms and cross-industry comparisons.

Practical implications

Managers, firm owners and regulators need to align IC to performance management to sustain the competitive advantage in globalised competitive settings.

Originality/value

The study provides an empirical evidence and extends knowledge of IC utilisation for enhancing the financial performance of the textile firms in emerging economies.

Citation

Chowdhury, L.A.M., Rana, T., Akter, M. and Hoque, M. (2018), "Impact of intellectual capital on financial performance: evidence from the Bangladeshi textile sector", Journal of Accounting & Organizational Change, Vol. 14 No. 4, pp. 429-454. https://doi.org/10.1108/JAOC-11-2017-0109