Intellectual Capital and its Association with Financial Performance: A Study of Indian Textile Sector

This study analyses the relationship of intellectual capital with financial performance measures of Indian textile sector for a period of 10 years ranging from 2002 to 2012. For the study, corporate annual reports, especially the profit and loss accounts and balance sheets of the selected companies for the relevant years have been used from CMIE prowess database. Value Added Intellectual Coefficient (VAIC) method is applied for measuring the intellectual capital of the companies. For analyzing any existing relationship between variables, correlation and OLS regression is used in this study. It has been observed that intellectual capital in textile sector has significant positive relationship only with profitability of the companies. The empirical analysis found that physical capital (VACA) was the one which was seen to have major impact on the profitability of the firms over the period of study. Results indicate that Indian investors consider only financial disclosure of the companies regarding their investment decision. The study provides useful knowledge to the researchers and managers regarding intellectual capital disclosure and its relation with financial performance.