Intellectual Capital and its Association with Profitability and Market Valuation in Indian IT Sector

This study examines the relationship of intellectual capital with profitability and market valuation of Indian information technology sector for a period of 10 years from 2006 to 2015 by collecting data from CMIE prowess database. The Value Added Intellectual Coefficient (VAIC^TM) method has been employed for measuring the intellectual capital of the companies. Correlation and panel regression has been applied in this study for analyzing the relationship between variables. It has been found from the study that intellectual capital in IT sector has significant impact on profitability of the companies. The analysis also found that intellectual capital has no role to play in increasing the market valuation of the companies. The findings indicate that investors consider only financial disclosure of the companies regarding their investment decision. The study provides useful knowledge to the researchers and managers regarding IC and its relation with financial performance.