Abstract:
Intellectual Capital has been recognized as an important corporate asset which plays an important role
for extraordinary financial performance. This study is conducted to examine the impact of Intellectual
Capital (IC) on Financial Performance (FP) in the context of Sri Lankan banks for the period of 2008 to
2017. Value Added Intellectual Coefficient (VAIC) methodology developed by Ante Pulic (2000) is
employed in this study to form a measurement basis for the IC. Return on Equity (ROE) and Market to
Book Value Ratio (M/B) measure the FP of selected banks. The data obtained from corporate annual
reports are regressed to measure the impact of IC on FP. Findings of this research indicate that, IC has a
significant positive impact on FP of Sri Lankan banks. Hence, outcomes of this research would motivate
bankers to apply knowledge management practice in their institutions. Moreover, study provides
valuable inputs to the stakeholders and potential investors to assess the value creating capabilities of
selected banks. This study emphasize the importance of decision makers’ awareness about the IC as a
key factor that can enhance a firm’s ability to maintain their competitive position.
