Effect of Intellectual Capital and Financial Performance of Quoted Conglomerate Firms in Nigeria

Abstract

This study examines the effect of intellectual capital on the financial performance of listed conglomerate firms in Nigeria, focusing on the period from 2012 to 2023. Specifically, it investigates the impact of Human Capital Efficiency (HCE), Structural Capital Efficiency (SCE), and Capital Employed Efficiency (CEE) on Return on Assets (ROA), with Firm Size (FS) included as a control variable. Using an ex post facto research design and cross-sectional panel data sourced from audited annual reports, the study applies the Value-Added Intellectual Coefficient (VAIC) model developed by Pulic (1998). Panel regression analysis was conducted with the aid of E-Views software, alongside diagnostic tests for normality, multicollinearity, and serial correlation. The findings reveal that HCE, SCE, and CEE have statistically insignificant effects on ROA, suggesting that intellectual capital components do not exert a strong short-term influence on firm profitability. Conversely, Firm Size demonstrates a significant negative relationship with ROA, indicating that increased scale may lead to operational inefficiencies and declining returns. These results highlight the need for a more integrated and strategic approach to intellectual capital management within Nigeria’s conglomerate sector. The study recommends enhancing human capital development through continuous training and aligning structural capital investments with operational goals. It also emphasizes the importance of managing firm growth strategically to avoid diminishing profitability. Overall, while intellectual capital remains crucial for long-term value creation, its financial benefits may require complementary strategies such as innovation and efficient governance structures to be fully realized.