The effect of intellectual capital on financial performance: An application on non-life insurance firms

This study aims to examine the relationship between the intellectual capital efficiency and financial performance of 38 non-life insurance firms operating in Turkey between 2004 and 2018. The intellectual capital efficiency of non-life insurance firms is measured by the value-added intellectual coefficient (VAIC) model. The effects of VAIC and its components (CEE, HCE, and SCE) on the financial performance of non-life insurance firms are estimated using the random-effects model. The most important intellectual capital component that constitutes the value-added intellectual coefficient of non-life insurance firms is human capital efficiency (HCE). Approximately %40 of the non-life insurance firms included in the analysis have a higher VAIC than the average VAIC (3.9557). VAIC has a statistically significant positive effect on the financial performance of insurance firms. When we divided VAIC into its components, we observe that capital employed efficiency (CEE) and human capital efficiency (HCE) affect the financial performance of non-life insurance firms negatively and positively, respectively. This finding proves that human capital is more crucial for non-life insurance firms than their financial or physical assets. Differently, structural capital efficiency (SCE) does not have a significant impact on the financial performance of insurance firms.