INTELLECTUAL & NATURAL CAPITAL AND FINANCIAL PERFORMANCE: EVIDENCE FROM LISTED MULTINATIONAL COMPANIES IN NIGERIA

Abstract

The era of the industrial economy is being replaced by a knowledge-based economy; hence a paradigm shift from resource-based to knowledge-based. This study, therefore, examines the effect of intellectual and natural capital on financial performance of listed multinational companies in Nigeria. The study period spanned ten (10) years from 2012 to 2021 and the data used for the study were sourced from the published financial statements of the companies and the Nigerian Exchange Group (NGX). Twenty-four (24) listed multinational companies constitute the population and nineteen (19) of them were selected as a sample based on a study filter. The ex-post facto research design and positivist research philosophy were adopted, and the study is anchored on resource-based theory and diffusion of innovation theory. The dependent variable of the study is proxied by Return on Equity (ROE) while Intellectual Capital (IC), and Natural Capital are the independent variables of the study. Revenue Growth (RG) is the control variable. Value Added Intellectual Coefficient (VAIC) measures intellectual capital. Natural Capital (NC) is proxied by Environmental Disclosure Index (EDI) in line with guidelines of the Global Reporting Initiative (GRI 2016). EDI is the average of all disclosures reported on eight parameters of environmental issues. Multiple regression with the aid of a statistical tool STATA version 16 was used for the data analysis. The outcome of the study revealed that intellectual capital has a positive and significant effect on financial performance of listed multinational companies in Nigeria. On the other hand, natural capital has a positive but insignificant effect on financial performance. The study concludes that intellectual capital enhances financial performance. Therefore, the study recommends that there should be more investment in intellectual capital as it significantly improves financial performance. The policy implication is for the management of the companies to continue and sustain the best practice of recruiting highly competent staff using high-rated human resources consultants because such creates value for the business owners and other stakeholders in the short, medium, and long-term.