The effect of intellectual capital on firm performance: an investigation of Iran insurance companies

Abstract

Purpose: The purpose of this paper is to analyze the role of intellectual capital (IC) and its relationship with financial performance of Iran insurance companies during the period 2005‐2007.Design/methodology/approach: In total, 39 insurance companies were selected as the sample. Regression model (partial least squares) has been applied to examine the relationship between IC and companies' return on assets ratio (ROA).Findings: The results of the research revealed that value added intellectual capital and its components have a significant positive relationship with companies' profitability.Practical implications: The VAIC™ method could be an important means for many decision makers to integrate IC in their decision‐making process, which allows insurance companies to benchmark themselves according to the IC efficiencies and develop strategies to enhance their company's performance.Originality/value: This is the first research, which has used the data on value added recently calculated and published by Iran insurance firms in the “Value Added Scoreboard”.