Abstract:
The aim of this research paper is to investigate the influence of
Intellectual Capital practices in achieving Corporate Performance in
business sectors in Colombo Stock Exchange (CSE). This is an exploratory
study based on analysing secondary data to examine the extent to which the
100 listed companies in 20 business sectors are adopting methodologies for
reporting intellectual capital in their annual reports as of March 31, 2011. The
Value Added Intellectual Coefficient (VAIC) has been employed to measure
the Intellectual Capital together with the measurements of value creation
efficiencies of capital employed, physical capital, human capital, and
structural capital of selected firms. The authors construct Ordinary Least
Square method of regression model to examine the relationship between
influences of Intellectual Capital in achieving Corporate Performance. The
results indicate that significant differences in market and book values of the
100 listed companies were found. Levels of voluntary disclosure of
Intellectual Capital items are relatively low while disclosures are dominated
by customer relations items.. The results support the hypothesis that firms’
Intellectual Capital has a positive impact on market value and Corporate
Performance, and may be an indicator for future Corporate Performance. In
addition, the authors found investors may place different value on the three
components of value creation efficiency (physical capital, human capital, and
structural capital). The analysis indicate that influence of Intellectual capital
practices on Corporate performance are mixed, and findings suggest that
human capital is very efficient than physical capital and structural capital.
The results suggest the need for further developments in Sri Lanka
Accounting Standards (LKAS) to take into account Intellectual Capital
disclosure in annual reports of companies. This paper makes an original
contribution to the growing body of empirical studies on Intellectual Capital
reporting in Sri Lanka and describes the usefulness of Intellectual Capital
reporting in Sri Lanka. The results of the study provide directions towards
building a strong knowledge base for future Intellectual Capital
development.
