Abstract:
Intellectual capital is considered as an important asset for an organization to achieve
its competitive advantage and sustainable corporate performance. However, these
assets are not recognized in the financial statement of an organization. This study
emphasized the importance of modified intellectual capital on the financial
performance of insurance companies in Sri Lanka. Thus, the main objective of this
study was to identify the impact of modified value-added intellectual capital on the
financial performance of the insurance industry in Sri Lanka. Data was collected
from the audited annual reports of seven insurance companies within the period of
2011-2018. Return on asset was calculated to measure the financial performance and
also the Modified Value-added Intellectual Capital Method (MVAIC) was used to
measure the intellectual capital of the insurance companies in Sri Lanka. The study
employed, panel data regression analysis as the main analytical method to achieve
the objective of the study. Accordingly, the findings revealed that the components
of the MVAIC such as human capital efficiency, structural capital efficiency,
relational capital efficiency and capital employee efficiency have a positive and
significant impact on the financial performance of the insurance industry in Sri
Lanka. Finally, the study came into the conclusion that intellectual capital has a
significant and a positive impact on financial performance of the Sri Lankan
insurance industry. Further, these findings will enable the knowledge management
in the insurance industry in Sri Lanka and will guide them the accurate way of
investing on the intellectual capital.
