The Knowledge Economy: How Intellectual Capital Drives Financial Performance of Non-financial Service Firms in Nigeria

Authors

  • Adamu Umar Federal Polytecnic Kaura Namoda
  • Kabiru Isa Dandago Bayero University Kano image/svg+xml

DOI:

https://doi.org/10.33003/fujafr-2023.v1i2.42.113-122

Abstract

The study investigates the relationship between intellectual capital and financial performance of 58 listed non-financial service firms in Nigeria for a period of eleven years from 2012 to 2022.The study extracts data from annual reports and accounts of the listed non-financial service firms in Nigeria. The study aligns with correlational research design and positivism research philosophy. The modified Value-added intellectual coefficient (MVAIC) method is applied to measure the value-based intellectual performance of the sampled firms. Return on equity (ROE) and Tobin’s (TQ) are used to measure the financial performance of the firms. The intellectual capital (human and structural and relational capital) of selected firms has been analyzed and their impact on financial performance has been measured using the multiple regression technique. The findings of the analysis reveal that the relationships between intellectual capital and financial performance indicators, namely ROE and TQ, are varied. The study results suggest that intellectual capital influences the financial performance of Nigeria’s listed non-financial service firms. The study recommends that the board of directors of non-financial service firms in Nigeria should identify, protect and ensure effective utilization of intellectual capital in their companies in order to achieve long-term success and competitiveness. The study provides policy implications as the MVAIC method can be used as an important tool by decision-makers in the knowledge economy to integrate intellectual capital in the decision-making process.  

References

Adams, R. B., & Ferreira, D. (2007). A theory of friendly boards. Journal of Finance, 62 (1), 217-250. DOI: https://doi.org/10.1111/j.1540-6261.2007.01206.x

Akbar, J. S. (2021). The effect of return on assets and return on equity on price to book value on banking companies listed on the Indonesia stock exchange. International Journal of Economics, Business and Accounting Research (IJEBAR), 5(3), 9-20.

Al-Daoud, K. I., Saidin, S. Z., & Abidin, S. (2016). Board meeting and firm performance: Evidence from the Amman stock exchange. Corporate Board: role, duties and composition, 12(2), 6-11. DOI: https://doi.org/10.22495/cbv12i2art1

Alkurdi, A., & Mardini, G. H. (2020). The impact of ownership structure and the board of directors’ composition on tax avoidance strategies: empirical evidence from Jordan. Journal of Financial Reporting and Accounting, 18(4), 795-812. DOI: https://doi.org/10.1108/JFRA-01-2020-0001

Anghel, I., Siminică, M., Cristea, M., Sichigea, M., & Noja, G. G. (2018). Intellectual capital and financial performance of biotech companies in the pharmaceutical industry. Amfiteatru Economic, 20(49), 631-646. DOI: https://doi.org/10.24818/EA/2018/49/631

Antosova, M., & Csikosova, A. (2011). Intellectual capital in context of knowledge management. In The economic geography of globalization. IntechOpen https://www.intechopen.com/chapters/16921 DOI: https://doi.org/10.5772/19186

Aslam, E., & Haron, R. (2020). Corporate governance and banking performance: The mediating role of intellectual capital among OIC countries. Corporate Governance. International Journal of Business in Society. DOI: DOI: https://doi.org/10.1108/CG-08-2020-0312

Bala, A. J., Raja, A. S., & Dandago, K. I. (2019). The mediating effect of intellectual capital on corporate governance and performance of conglomerates in Nigeria. SEISENSE Journal of Management, 2(3), 16-29. DOI: https://doi.org/10.33215/sjom.v2i3.109

Bansal, D., & Singh, S. (2020). Impact of intellectual capital on financial performance of the Indian software sector. Asia-Pacific Management Accounting Journal (APMAJ), 15(1), 68-95. DOI: https://doi.org/10.24191/APMAJ.v15i1-04

Chowdhury, L. A. M., Rana, T., Akter, M., & Hoque, M. (2018). Impact of intellectual capital on financial performance: evidence from the Bangladeshi textile sector. Journal of Accounting & Organizational Change, 14(4), 429-454. DOI: https://doi.org/10.1108/JAOC-11-2017-0109

Ciprian, G. G., Valentin, R., Mădălina, G. I. A., & Lucia, V. V. M. (2012). From visible to hidden intangible assets. Procedia-Social and Behavioral Sciences, 62, 682-688. DOI: https://doi.org/10.1016/j.sbspro.2012.09.116

Hair, J.F., Hult, G.T.M., Ringle, C.M. and Sarstedt, M. (2014), A Primer on Partial Least Squares Structural Equation Modeling, Sage, Thousand Oaks, CA.

Kajola S. O., Onaolapo A. A., & Adelowotan M. O. (2017). The effect of corporate board size on financial performance of Nigerian listed firms. Nigerian Journal of Management Sciences, 6(1), 205- 213.

Kasoga, P. S. (2020). Does investing in intellectual capital improve financial performance? Panel evidence from firms listed in Tanzania DSE. Cogent Economics & Finance, 8(1), 1 – 26 DOI: https://doi.org/10.1080/23322039.2020.1802815

Nasir, A. M. & Mainoma H. M. (2023). Relationship in Principle between Corporate Governance, Intellectual Capital Disclosure and Firm Performance. FUDMA Journal of Accounting and Finance Research [FUJAFR], 1(1), 65-76. DOI : DOI: https://doi.org/10.33003/fujafr-2023.v1i1.10.65-76

Olanisebe, M., Abdullahi, S., & Dandago, K. (2023). Managerial ownership and tax avoidance of listed companies in Nigeria with profitability as mediating variable. FUDMA Journal of Accounting and Finance Research [FUJAFR], 1(1), 1-26. DOI: DOI: https://doi.org/10.33003/fujafr-2023.v1i1.2.1-26

Onyekwelu, U. L., Ifeanyi, O. J., & Iyidiobi, F. C. (2017). Effect of intellectual capital on financial performance of banks in Nigeria. European Journal of Accounting, Auditing and Finance Research, 5(2), 28-57.

Ousama, A. A., Hammami, H., & Abdulkarim, M. (2019). The association between intellectual capital and financial performance in the Islamic banking industry: An analysis of the GCC banks. International Journal of Islamic and Middle Eastern Finance and Management, 13(1), 75-93. DOI: https://doi.org/10.1108/IMEFM-05-2016-0073

Quintero-Quintero, W., Blanco-Ariza, A. B., & Garzón-Castrillón, M. A. (2021). Intellectual capital: A review and bibliometric analysis. Publications, 9(46),1-23. DOI: DOI: https://doi.org/10.3390/publications9040046

Rositha, A.H., Firdausi, N., & Darmawan A. (2019). Board of director’s characteristics, intellectual capital, and bank performance. The International Journal of Accounting and Business Society, 27(2),1- 26. DOI: https://doi.org/10.21776/ub.ijabs.2019.27.2.1

Rouwenhorst, R. (2018). The impact of board characteristics on firm's financial performance: evidence from the Netherlands (Master's thesis, University of Twente).

Shahwan, T. M., & Fathalla, M. M. (2020). The mediating role of intellectual capital in corporate governance and the corporate performance. International Journal of Ethics and Systems, 36(4), 531 – 561. DOI: https://doi.org/10.1108/IJOES-03-2020-0022

Shaneeb, P., & Sumathy, M. (2021). Impact of Intellectual Capital on Financial Performance in Indian Textile Industries. Academy of Accounting and Financial Studies Journal, 25(4), 1-14.

Sofian, S., Tayles, M., & Pike, R. H. (2004). Intellectual capital: an evolutionary change in management accounting practices. University of Bradford, School of Management.

Sullivan, P. (2000). Value-Driven Intellectual Capital-How to Convert Intangible Corporate Assets into Market Value, John Wiley and Sons, New York, NY.

Tran, N. P., Van, L. T.-H., & Vo, D. H. (2020). The nexus between corporate governance and intellectual capital in Vietnam. Journal of Asia Business Studies, 14(5), 637–650. DOI: https://doi.org/10.1108/JABS-01-2020-0007

Wondem, B. A., & Batra, G. S. (2019). The impact of corporate governance practices on corporate financial performance in Ethiopia. International Journal of Accounting Research, 7(1), 1-10 DOI: https://doi.org/10.35248/2472-114X.19.7.196

Xu, J., & Li, J. (2019). The impact of intellectual capital on SMEs’ performance in China. Journal of Intellectual Capital, 20(4), 488– 509. DOI: https://doi.org/10.1108/JIC-04-2018-0074

Downloads

Published

09-11-2023

Issue

Vol. 1 No. 2 (2023): September 30, 2023

Section

List of Contents

License

Copyright (c) 2023 FUDMA Journal of Accounting and Finance Research [FUJAFR]

Creative Commons License

This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.

The FUDMA Journal of Accounting and Finance Research (FUJAFR) operates a copyright policy that ensures a balance between author rights and wide dissemination of scholarly work.

1. Author Copyright Retention

Authors retain full copyright of their published work without restriction. Submission to FUJAFR does not transfer ownership of copyright to the journal.

2. License to Publish

By submitting a manuscript and upon acceptance, authors grant FUJAFR:

  • The right to publish, reproduce, and distribute the article
  • The right to identify itself as the original publisher of the work

This grant is non-exclusive, meaning authors are free to reuse their work in other contexts, provided proper acknowledgment of the original publication in FUJAFR is made.

3. Licensing of Published Content

All articles are published under the:

Creative Commons Attribution-NonCommercial License (CC BY-NC 4.0)

Under this license:

  • Users may share and adapt the work for non-commercial purposes only
  • Proper attribution to the author(s) and the journal is required
  • Any commercial use requires explicit permission from the copyright holder

4. Author Reuse Rights

Authors are permitted to:

  • Archive their published articles in institutional repositories or personal websites
  • Share their work for educational and research purposes
  • Reuse portions of their work in future publications (e.g., books or other articles), provided proper citation of the original publication is included

5. Third-Party Content

Authors are responsible for obtaining permission to use any third-party copyrighted material (e.g., images, tables, datasets) included in their manuscripts. Proper acknowledgment must be provided where required.

6. Attribution Requirement

All users of FUJAFR content must provide appropriate credit, including:

  • Author name(s)
  • Article title
  • Journal name (FUJAFR) 
  • Year of publication 

How to Cite

Umar, A., & Dandago, K. I. (2023). The Knowledge Economy: How Intellectual Capital Drives Financial Performance of Non-financial Service Firms in Nigeria. FUDMA Journal of Accounting and Finance Research [FUJAFR], 1(2), 113-122. https://doi.org/10.33003/fujafr-2023.v1i2.42.113-122

Most read articles by the same author(s)