The Influence of Intellectual Capital on Financial Performance: Quantile Analysis Approach

Abstract

Intellectual capital (IC) is being increasingly investigated in fields experiencing change. In management accounting, such changes are visible in areas like strategic management accounting, and environmental management accounting. The relevance of non-financial information is increasingly greater, seeking information from intangible assets that can be used to judge the market value of firms. Given the importance of the theme and consistent growth of intangible assets in today's economy, this research aims to explore the influence of IC components on the financial performance of Egyptian firms listed in EGX100. To investigate the relationship between IC and firms’ financial performance, secondary data were collected from Thomson Reuters DataStream for a sample of 30 firms listed in EGX 100, from 2017 to 2023 resulting in panel data of 210 firm-year observations. Quantile regression analysis is employed to explore the relationship between each component of IC and firms’ financial performance. Quantile regression models revealed that not all the quantile models have the same calculated significance value (P-value) regarding the relationship between IC components (Value added human capital VAHC, Value added structural capital VASC, Value added relational capital VARC, Value added capital employed VACE) and financial performance measures represented by Return on Equity ROE, Return on Assets ROA, Earning per Share EPS, Price to Book ratio P/B ratio, and Tobin’s Q. Modified Value Added Intellectual Coefficient (MVAIC) also have a positive significant impact on EPS, P/B, and Tobin’s Q. Firm size is negatively and significantly related to accounting-based measures, firm age has a positive impact on accounting-based measures while leverage have negative relationship with most financial performance measures. Size of the sample, and the exclusion of financial institutions from the sample represent the main research limitations. The research contributes to literature through measuring the total and individual influence of the four components of IC on firms’ financial performance using Quantile Regression Analysis which has not been employed before in investigating the relationship between IC and financial performance of Egyptian listed firms.