dc.description.abstract |
It is expected that companies listed in the Security Exchange may have strong
financial performance rates. Despite the popular belief among scholars that
intellectual capital efficiency has a significant effect on firm financial results,
evidence from financial management studies that support this proposition has
presented have been varied. Given the aforesaid, the objective of the study was to
investigate the relationship between Intellectual capital efficiency firm's financial
performance and how chief executive officer's tenure moderating the relationship
between intellectual capital elements and financial performance of firms in Kenya.
This study was informed by Agency theory, Dynamics capability, and Resource-based
theory. A longitudinal research design was used. The study targeted 67 firms in
Nairobi Security Exchange. The study used secondary data (financial reports) to
obtain financial performance information from 48 firms with full information from
Capital Market Authority Statistical Bulletins and Nairobi Securities Exchange
Handbook for a period of twelve years from 2006 to 2017. Data were analysed using
both descriptive and inferential statistics. Specifically, Pearson's correlation
coefficient, standard multiple regression analysis, and hierarchical multiple regression
analysis were adopted to analyse and test the hypotheses. The study established a
positive and significant effect between Human capital (β = 0.18; ρ<0.05), Structural
capital (β = 0.11; ρ>0.05), Capital employed and firm financial performance (β =
0.95; ρ<0.05) and Innovation capital (β = 0.14; ρ<0.05). The sum of the intellectual
capital coefficient had a positive and significant effect on Firm Financial Performance
(β= 0.02, ρ<0.05). The moderating variable CEO tenure had a positive and significant
relationship between Intellectual Capital on financial performance (β = 0.04; ρ<0.05).
When the independent variables were moderated with CEO tenure the study findings
indicated CEO tenure moderated the relationship between Human capital and
financial performance (β= -0.12; ρ<0.05), Structural capital and firm financial
performance (β= 0.01; ρ<0.05), Capital Employed and firm financial performance(β=
0.005; ρ<0.05), Innovation capital and firm financial performance (β= -0.03; ρ<0.05)
and Modified Value Added Intellectual confident and firm financial performance (β=
0.14; ρ<0.05), hence the existence of moderating effect of Chief Executive Officer
tenure on the relationship between the three intellectual capital components and firm
financial performance and VAIC. The study concludes that in determining financial
performance levels among firms in the Nairobi Securities Exchange, human capital,
and capital employed, and innovation capital and VAIC are significant. In general,
CEO tenure equally enhances the influences on financial performance levels given the
intellectual capital efficiency. The results support the Agency theory, Dynamic
Capability Theory, and Resource-based theory by clarifying how the organization
decision-makers build, assemble, and recombine internal and external capabilities to
answer quickly shifting the firm's financial environments. This study has brought to
the fore significant evidence that will help in generating an additional improvement
on the understanding of Intellectual components and their effect on the firm's financial
performance moderated by CEOs' tenure both empirically and methodologically. It
offers evidence to the regulatory bodies as well as academicians with an
understanding of Intellectual Capital components practices in the annual report of
firms listed in Nairobi Security Exchange. The study contributes to the on-going
discussions on the rationality of linking intellectual capital components to the
traditional accounting-based measures to enhance firm financial performance. |
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