Intellectual capital and financial performance: an evaluation of the Australian financial sector

Intellectual capital and financial performance: an evaluation of the Australian financial sector Purpose – The purpose of this paper is to examine the intellectual capital (IC) performance of the Australian Financial Sector for the period 2006‐2008. It also aims to examine the relationship between IC performance and the financial performance of the financial sector. Design/methodology/approach – The value added intellectual coefficient (VAIC) approach developed by Pulic is used to determine the IC performance of the Australian financial sector. The required data to calculate different constituents of IC was obtained from the annual reports of Australian Financial Sector companies. Findings – The value creation capability of financial sector in Australia is highly influenced by human capital. About two thirds of the sample companies have very low levels of intellectual capital efficiency. The performance of various components of VAIC and overall VAIC differs across all subsectors in the financial sector. Investment companies have high value VAIC due to higher a level of human capital efficiency, as compared to banks, insurance companies, diversified financials and RIETs. Insurance companies are more focussed on physical capital rather than human and structural capital leading to lower VAIC. Research limitations/implications – The paper analyses IC performance of only one sector of the Australian economy and there is a relatively narrow three‐year period for the data collection. However, a comparative analysis of various sub sectors in the Australian financial sector justifies the contributions made by this study. Practical implications – The findings may serve as a useful input for financial institutions to apply knowledge management in their institutions and in addressing the factors affecting IC performance in order to maximise their value creation. It will also help the management of companies in other sectors, especially those in knowledge‐based industries, in understanding the contributions of various components of intellectual capital in their growth. Originality/value – This is the first paper that examines the relationship of intellectual capital performance with financial performance of financial sector companies in Australia. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Intellectual Capital Emerald Publishing

Intellectual capital and financial performance: an evaluation of the Australian financial sector

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Publisher
Emerald Publishing
Copyright
Copyright © 2013 Emerald Group Publishing Limited. All rights reserved.
ISSN
1469-1930
DOI
10.1108/14691931311323887
Publisher site
See Article on Publisher Site

Abstract

Purpose – The purpose of this paper is to examine the intellectual capital (IC) performance of the Australian Financial Sector for the period 2006‐2008. It also aims to examine the relationship between IC performance and the financial performance of the financial sector. Design/methodology/approach – The value added intellectual coefficient (VAIC) approach developed by Pulic is used to determine the IC performance of the Australian financial sector. The required data to calculate different constituents of IC was obtained from the annual reports of Australian Financial Sector companies. Findings – The value creation capability of financial sector in Australia is highly influenced by human capital. About two thirds of the sample companies have very low levels of intellectual capital efficiency. The performance of various components of VAIC and overall VAIC differs across all subsectors in the financial sector. Investment companies have high value VAIC due to higher a level of human capital efficiency, as compared to banks, insurance companies, diversified financials and RIETs. Insurance companies are more focussed on physical capital rather than human and structural capital leading to lower VAIC. Research limitations/implications – The paper analyses IC performance of only one sector of the Australian economy and there is a relatively narrow three‐year period for the data collection. However, a comparative analysis of various sub sectors in the Australian financial sector justifies the contributions made by this study. Practical implications – The findings may serve as a useful input for financial institutions to apply knowledge management in their institutions and in addressing the factors affecting IC performance in order to maximise their value creation. It will also help the management of companies in other sectors, especially those in knowledge‐based industries, in understanding the contributions of various components of intellectual capital in their growth. Originality/value – This is the first paper that examines the relationship of intellectual capital performance with financial performance of financial sector companies in Australia.

Journal

Journal of Intellectual CapitalEmerald Publishing

Published: Apr 12, 2013

Keywords: Intellectual capital; Human capital; Financial sector; Value added intellectual coefficient; Australia; Banks; Financial performance; Financial reporting; Knowledge management

References

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