Testing the relationship between intellectual capital and a firm's performance: an empirical investigation regarding financial industries of Pakistan

The purpose of this study is to investigate the intellectual capital (IC)'s performance and its impact on the financial performance of 78 listed financial industries of Pakistan from 2008 to 2013. VAIC™ model is applied to measure the efficiency of IC and its components. The empirical results obtained from the study clearly indicate that IC is an important determinant of the financial efficiency of the Pakistani financial firms. However, when IC is divided into parts, the performance of human capital plays a significant role. As a whole, all companies have relatively higher human capital performance than structural and tangible capital efficiencies. This study makes a valuable addition in the literature by selecting all the financial sectors of Pakistan (banks, life and non-life insurance firms, modaraba firms, mutual fund firms and leasing firms) to investigate the intellectual capital-performance relationship as the previous researchers focused only on one or two financial sectors.