The impact of intellectual capital on the financial performance of listed companies in Indonesia Stock Exchange
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Universiti Malaysia Sarawak
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The Indonesian capital market has shown significant sectoral shifts between 2021 and 2023, with financial firms remaining dominant, while infrastructure and consumer sectors have grown, and industrial and technology sectors have declined. These changes highlight that tangible assets alone cannot explain corporate performance, emphasizing the growing importance of intangible assets, particularly intellectual capital (IC), as a key driver of competitiveness and firm value in emerging economies. This study examines the impact of IC on the financial performance of firms listed on the Indonesia Stock Exchange from 2016 to 2022, analyzing how the four IC components: physical, financial, human, and structural capital affect return on assets and market value. Using panel data from 125 manufacturing firms across three sub-sectors, the study employed pooled, fixed effects, and random effects models, with statistical tests confirming that the fixed effects model best captured firm performance, while the random effects model was more suitable for market value. The findings reveal that IC significantly influences firm outcomes, with human capital having the strongest impact on financial performance, followed by financial capital, while physical and structural capital are less significant. Effective management of these resources enhances operational performance, transparency, and investor confidence, supporting Indonesia’s innovation-based growth. The study underscores the strategic role of intellectual capital as a foundation for sustainable, knowledge driven development through collaboration between academia, industry, and government, while suggesting that future research should include broader data and qualitative perspectives for a deeper understanding of IC’s long term impact.