Intellectual Capital Efficiency and Firm Financial Performance: Evidence from South East Asian Countries

This study applies a modified version of the Value Added Intellectual Coefficient (VAIC) model proposed by Pulic (1998; 2000) to investigate the impact of IC on financial performance of listed firms in five South East Asian (SEA) countries: Indonesia, Malaysia, Philippines, Singapore, and Thailand over the period 2006 to 2013. The sample employed consists of 16,039 firm-year observations. Financial performance is measured using return on equity and return on assets ratios. The study employs the VAIC model to measure aggregate IC efficiency and its elements: human capital efficiency, structural capital efficiency and tangible capital efficiency. The test results indicate that aggregate IC has a positive and significant impact on financial performance of listed firms in the five SEA countries. The results also show that, among the components of IC, human capital and tangible capital both have positive and significant impact on financial performance of listed firm in the five SEA countries. However, structural capital has a negative impact on financial performance of firms in all SEA countries other than Thailand, which contradicts the theoretical expectation