Nexus between intellectual capital and business performance: evidence from India

PurposeThe prime intention of this study is to examine the influence of intellectual capital (IC) on the financial performance of Indian companies listed on Standard and Poor Bombay Stock Exchange Sensitive Index (BSE SENSEX).Design/methodology/approachThe study employs the data of 30 most significant and most prominent companies of India listed on BSE SENSEX for 10 years from 2009–2010 to 2018–2019. Value Added Intellectual Coefficient (VAICTM) methodology developed by Pulic (2000) was employed for measuring the efficiency of the IC.FindingsThe efficiency of IC is substantially and positively associated with the financial performance of the Indian companies as measured by return on assets (ROA), market-to-book (MB) ratio and return on equity (ROE). Amongst the three dimensions of VAIC, capital employed efficiency (CEE) was the most vital element in contributing to the firm financial performance, followed by human capital efficiency (HCE). Structural capital efficiency (SCE) only helps in enhancing the ROA of Indian firms.Research limitations/implicationsThe study results are only restricted to the 30 companies of India listed on S&P BSE SENSEX Index. Thus generalization of the result needs especial caution.Originality/valueThe study fills the void in the current literature of IC and business performance and extends the understanding of their relationship by providing empirical evidence.


Introduction
In the era of production, physical assets used to be the main factors of production, but with the advancement in the technology, the main factors of production shifted from tangible assets to the intangible assets. These intangible assets include the employee's competency and experience, their problem-solving ability, research and development (R&D), systems and databases, relation with the various stakeholders, etc. It is known as intellectual capital (IC). It does not appear on the conventional financial statement, but it is extravagant for the firms' performance (Akpinar and Akdemir, 1996). The organisation can easily accomplish a competitive advantage through the effective leveraging of their IC (Bismuth and Tojo, 2008;Chen et al., 2005). In other words, if an organisation wants to flourish in the contemporaneous technological era, then the knowledge and experience of its employees should be focussed along with their infrastructure and relationship with various stakeholders. IC and knowledge management plays a paramount role in the business organisation of today's globalised world (Wiig, 1997).
An IC is a useful tool in escalating the future growth of the company. However, the conventional financial statement failed to record the bulk of these IC, because employees' knowledge and skill, expertise and innovation, relation with the stakeholders, systems and databases, etc. are very tough to quantify. In addition, the traditional accounting reporting system records mainly tangible assets, while it ignores the majority of the intangible assets, except for goodwill, concessions, licences, etc., which contributes substantially in the production and value creation of an organisation. Also, some researchers believe that the evaluation of the real financial performance of the organisation cannot be possible with conventional measures of business performance (Bontis, 2001;Edvinsson and Malone, 1997;Sveiby, 2001). Therefore, it tempted the academicians and researchers to develop new tools and techniques for measuring the firm's IC so that a rational decision can be taken by the stakeholders (Pulic, 1998). Given all these drawbacks and limitations of the traditional financial reporting system, Pulic (1998Pulic ( , 2000 proposed a model to measure these intangible assets, named Value Added Intellectual Coefficient TM (VAIC TM ) model.
Many organisations in the developed countries now find it feasible to measure and report their IC as they now recognise its importance in the process of value creation to the firm. Howbeit, merely limited research studies have been conducted in this area in emerging economies like India. According to Smriti and Das (2018) and Vishnu and Gupta (2014), IC measurement and reporting are at the stage of infancy in the developing economy like India. Many previous studies (Al-Musali and Ku Ismail, 2016;Ghosh and Mondal, 2009;Kamath, 2008;Mehralian et al., 2012;Pulic, 1998;Weqar et al., 2021) had attempted to explore a liaison amidst the IC and corporate financial performance. The objective of the current study is to examine the link between the IC and its dimensions and firms' financial performance. The contemporary research extends the existing research by empirically examining the above link in the Indian context by taking a sample of 30 largest, financially sound and most actively traded stocks on the Bombay Stock Exchange (BSE) of India by applying the VAIC TM model. The novelty of the study lies in its data set of 30 firms listed on BSE, as these 30 firms are associated with 19 different sectors of the Indian economy, thus giving a more accurate representation of the whole economy.
The study employed the fixed effect regression model for examining the effect of IC on the firm financial performance and found that IC plays a vital role in augmenting the performance of the Indian companies. The result also shows that human capital and physical capital are the most significant elements of VAIC for the improvement of firms' financial performance. The study results provide an insight to the managers that a good campaign should be organised within an organisation to create awareness about the importance of IC amongst their employees and managers. Moreover, the policymakers should give due consideration to an IC and its dimensions in their upcoming policies, and IC disclosure should be made mandatory for the company in their financial statement.
The remaining chunk of the paper is organised as follows: Section 2 gives an overview of S&P BSE SENSEX followed by the literature review, research objectives and hypotheses development in Section 3. Section 4 encompasses sample size, data collection, variables and their proxy measures, and regression models. Moreover, Section 5 shows the results of the analysis, which includes the descriptive statistics, correlation matrix and regression results. Further, discussion and contribution of the study are presented in Section 6 while the last section, i.e. Section 7 concludes the study.

S&P BSE SENSEX: an overview
Standard and Poor Bombay Stock Exchange Sensitive Index (S&P BSE SENSEX) is the first stock exchange of Asia. It is the gauge of the Indian market that measures the financial performance of the 30 largest and financially sound organisations (LLC, 2018). It is a bunch of 30 most-liquid and most actively traded companies (Exchange, 2020). In August 2018, the Intellectual capital and business performance total market capitalisation was reported at a lifetime high at ₹15,656,944 crore (Sonavane and Sultana, 2018). The S&P BSE SENSEX represents nearly about 40% of the equity market in India in terms of total market capitalisation on 31 March 2018 (LLC, 2018). These 30 companies are the big giants, and the majority of them shows their presence in the international market.
3. Literature review 3.1 Understanding the term IC and its taxonomy There are various terms which are used interchangeably for IC such asintangible, intangible resources, intangible assets, knowledge assets, intangible goods (Bismuth and Tojo, 2008;Chen et al., 2005). Many researchers and authors have given their definition, but still, there has been no universal definition of IC. According to Andriessen (2004), IC is the packaged useful knowledge. Peng, Pike and Roos (2007) opined that IC is the aggregate knowledge of its members and the practical translation of this knowledge into brands, trademarks and processes. Stewart (1997) believed IC as something that cannot be touched, although it slowly makes you rich.
Numerous authors and researchers have classified IC in two to five parts. However, the common IC taxonomy was given by Edvinsson and Malone (1997) into three dimensions as "human capital, internal (structural capital) and external (relational) capital". Another renowned classification of IC is given by Saint-Onge (1996) as "human capital, structural capital and customer capital".
Human capital (HC) is deliberated to be the utmost significant asset of intangible nature. It includes the knowledge and skill of an employee, their problem-solving abilities, their innovations and experiences, etc. HC is a mixture of genetic inheritance, education and experience, attitude and talent of an employee in an organisation (Weqar et al., 2021). Structural capital (SC) is that fragment of IC which remains in the organisation when the employees go home. It acts as a support for the HC of the firm (Ghosh and Mondal, 2009). It involves non-physical components such as databases, organisation charts and systems, patents and models, processes, cultures, business strategies and data processes (Akpinar and Akdemir, 1996). Customer capital (CC)/relational capital (RC) includes the relationship of the organisation with the customers, shareholders, suppliers, government, financial institution and society (Roos and Roos, 1997). It acts as a link between the organisation and various stakeholders.
3.2 IC and financial performance IC helps in attaining competitive edge and value addition to the enterprise, which directly and indirectly enhances its financial performance (Weqar et al., 2020). Though, for the above purpose, physical and financial resources are also required (Pulic, 2000), as IC alone is reluctant to create value to the organisation. Pulic (2000) supported the view of Wernerfelt's (1984) resource-based (RB) theory that in order to attain competitive edge and value addition, all types of resources (tangible and non-tangible) are the prerequisites. By following the RB theory of Wernerfelt (1984), a significant link amid IC and firm performance are expected. The explored literature employed the VAIC TM methodology to scrutinise the effect of IC on the organisations' financial performance. Nevertheless, some studies in the literature also used the primary survey to check the same.
For instance, Chen et al. (2005) founded that IC, human capital efficiency (HCE) and capital employed efficiency (CEE) are positively related to all the financial performance indicators of the Taiwanese firms. Sardo et al. (2018) conducted a study on Portuguese small and medium enterprises (SMEs) hotels and showed that all three dimensions of IC are positively associated with its profitability. A noticeable study on the non-listed Italian companies was conducted by Ginesti et al. (2018) for examining the effect of IC on firms' reputation and financial performance. They proved that HC is positively associated with the reputation of the Italian firms, and the other two components are linked significantly with its financial performance.
The study conducted by Kamath (2008) had found that HC was the most significant element in the Indian pharmaceutical industry, and the firm performance was not affected by its IC. Ghosh and Mondal (2009) showed that IC has a significant positive effect on profitability and an insignificant impact on productivity and market valuation (market-tobook (MB) value) of the Indian software and pharmaceutical industry. Smriti and Das (2018) had conducted a study on 710 Indian listed firms and found that IC, structural capital efficiency (SCE) and CEE are positively associated with the majority of the financial performance indicator, while HCE only helps in boosting the firms' assets turnover (ATO).
A prominent study on South African firms by Firer and Williams (2003) showed that SCE is only significant for profitability, while CEE enhances its MB. Conversely, Kamath (2008) had found no substantial effect of HCE, SCE and CEE on the financial performance of the Indian pharmaceutical industry. Another critical study had been conducted by Mehralian et al. (2012) on Iranian pharmaceutical industry and reported that only CEE has a positive connection with return on assets (ROA), while the investors under-valued the firm having high VAIC. Using the sample of Bangladeshi textile firms, Afroz et al. (2018) concluded that HCE is insignificant for all the financial performance indicator while CEE showed a very high definite link with these indicators. Similarly, Bontis et al. (2015) proved that CEE plays a substantial role in augmenting the performance of the Serbian hotel industry than HC and SC. Clarke et al. (2011) established a significant positive link of HCE and IC with the entire indicators of the financial performance of the Australian firms. A study on Serbian MNCs showed that HCE and CEE have a significant positive effect on its ROA, return on equity (ROE) and ATO (Komnenic and Pokraj ci c, 2012). Using 5749 US commercial banks, Meles et al. (2016) demonstrated that HCE and IC are significantly and positively associated with return on average assets and return on average equity. Conversely, Dzenopoljac et al. (2017) and Xu and Liu (2020) reported that CEE is the most influential asset in enhancing the financial performance of the firms of Korea and the Kingdom of Saudi Arabia, respectively. Weqar and Haque (2020b) confirmed that IC plays a significant role in improving the profitability, productivity and market value of the Indian public sector companies. Maditinos et al. (2011) conducted their study on 96 Greek companies and reported that SCE, CEE and VAIC have an inconsequential impact on MB, ROA, ROE and growth revenues (GR). However, only HCE shows a significant positive effect on MB and ROE. Conversely, Joshi et al. (2013) proved that CEE is the most significant element in enhancing the ROA of the Australian financial firms while HCE, SCE and VAIC are insignificant towards it. A study on banks of six Gulf Cooperation Council (GCC) countries was performed by Al-Musali and Ku Ismail (2016). They showed that VAIC positively influences their profitability (ROA and ROE). Likewise, Mohammed and Irbo (2018) concluded that VAIC and all its component help in improving ROA of the Ethiopian banks. Nadeem et al. (2019) had applied the adjusted-VAIC model in five developing and five developed nations of the globe and reported that HCE, innovation capital efficiency (INVCE) and CEE have a strong positive influence on firms' ROA and ROE of the majority of the nation.
The prevailing research on IC concludes that IC helps in enhancing and improving the financial performance of the business organisation by creating value-addition and achieving competitive advantage. However, this link needs to be validated in the different sectors of the various economies of the world, as the economic, social, technological, political and financial conditions differ from country-to-country. Moreover, the literature on IC is very limited in India as it is still in the embryonic stage (Smriti and Das, 2018). Furthermore, in the Indian context, the majority of the studies is based on the banking and pharmaceutical industry, which gives the holistic view of that particular sector only. As far as the authors' knowledge, Intellectual capital and business performance no single study had been yet conducted in India that gives a complete overview of the Indian economy. Therefore, in this backdrop, the present study has been undertaken by taking a sample of firms from 19 different sectors of Indian economy.

Research objectives
In this knowledge era, where the technology dominates the production of goods and services, the role and prominence of IC and the knowledge management should be recognised effectively. Since the traditional measure of financial performance fails in reporting and measuring these IC, therefore, there is an utmost need to measure it, so that its effect can be examined on the firms' financial performance. Therefore in this backdrop, subsequent are the objectives of the present study: (1) To quantify the IC efficiency of 30 firms listed on the S&P BSE SENSEX.
(2) To discover the liaison amidst IC and the firms' financial performance.
(3) To scrutinise the effect of each component of IC on the firms' financial performance.

Hypotheses development
For the first objective, no hypothesis is needed as it involves only measuring the efficiency of an IC. For the second objective, we propose the following hypothesis: H1. VAIC TM positively influences firms' financial performance.
The rationale of the hypothesis mentioned above is to examine the link concerning VAIC and the traditional measures of the firms' financial performance measured by ROA, MB and ROE. VAIC TM here denotes the total IC efficiency of a firm. The detailed explanation of these variables is given in Section 4.2.
For the third objective of the study, three hypotheses are proposed to find out the connexion between the individual constituents of IC efficiency and the financial performance of a firm. The three components of VAIC are "capital employed efficiency (CEE), human capital efficiency (HCE) and structural capital efficiency (SCE)". Therefore, the hypotheses are: H1a. CEE positively influences firms' financial performance.

Research methodology 4.1 Sample size and data collection
The sample size of this study encompasses 30 companies which together constitutes the S&P BSE SENSEX of India. The data were extracted from the "Prowess" database, which is maintained by the "Centre for Monitoring Indian Economy (CMIE)". The period of the study is 10 years and it ranges from 2009-2010 to 2018-2019. The reason for taking these 30 companies are as follows: firstly, these 30 companies are prominent companies representing nearly 40% of the equity market in India in terms of market capitalisation as on 31 March 2018 (LLC, 2018). Secondly, these 30 companies of BSE SENSEX act as a representative of the Indian market as it includes the firm from around 19 sectors of the Indian market. Through these companies, we can get a clear understanding of the IC performance of Indian companies. Since these are the prominent Indian companies, therefore there are no missing data. Hence the final sample is of 30 companies for 10 years (300 observations). The sample distribution based on the industry/sector is given in  (Firer and Williams, 2003;Kamath, 2008;Mehralian et al., 2012;Scafarto et al., 2016;Weqar and Haque, 2020a), MB ratio (Ghosh and Mondal, 2009;Kamath, 2008;Mehralian et al., 2012;Weqar and Haque, 2020b) and ROE (Bontis et al., 2013;Chen et al., 2005;Komnenic and Pokraj ci c, 2012;Xu and Liu, 2020). These are further explained as under: (1) Return on assets (ROA): It measures the profit earned by the company concerning the amount invested in their total assets. ROA is calculated as: to create value-addition, the firm needs physical and financial capital along with the IC, as IC alone can not add value to the firm. VAIC TM is the summation of three constituents: "capital employed efficiency (CEE), human capital efficiency (HCE), and structural capital efficiency (SCE)". Algebraically, The higher the VAIC of the company better will be its IC performance. Furthermore, for calculating the components of VAIC, firstly, the firms' total value-added (VA) is to be calculated. The calculation of VA is shown in the following algebraic equation, as shown below: Where, D 5 Depreciation; A 5 Amortisation; OP 5 Operating profit; EC 5 Employee cost After calculating the VA, the subsequent phase is to calculate the efficiency of the specific mechanisms of VAIC, i.e. CEE, HCE and SCE.
According to Pulic (2000), CEE is the ratio of VA and capital employed (CE). CEE indicates the addition in the value-creation of the firm by using one monetary unit of its CE. Algebraically CEE 5 Capital employed efficiency; VA 5 Value added for firm; CE 5 Capital employed HCE is the ratio of VA and HC (Pulic, 2000). HCE shows the amount added in the valuecreation of the firm by employing one monetary unit on HC. "Total salary and wage cost" are taken as a proxy variable for HC (Ghosh and Mondal, 2009;Pulic, 2000Pulic, , 2004. Algebraically HCE ¼ VA=HC Where, HCE 5 Human capital efficiency; VA 5 Value added for the firm; HC 5 Human capital (total salary and wage cost of the firm) Now, for the calculation of SCE, first, we have to calculate SC. According to Pulic (2000), SC is calculated by subtracting HC from VA. He also argues that HC and SC are inversely proportional to each other in the process of value creation. Therefore, SC ¼ VA À HC SCE is the representation of the value-addition by employing one monetary unit in the structural capital of the firm. SCE is the ratio of SC and VA. Algebraically SCE ¼ SC=VA Where, SC 5 Structural capital of the firm; VA 5 Value added for the firm; HC 5 Human capital (total salary and wage cost of the firm); SCE 5 Structural capital employed Moreover, few researchers had criticized the VAIC model. For instance, Stahle et al. (2011) opined that VAIC has nothing to do with the firm's IC; instead, it measures the efficiency of labour and capital of the firm. Likewise, this model also ignores the synergy effect that occurs amongst the tangible and intangible assets of the firm (Dzenopoljac et al., 2017). Also, it does not consider the firm's relational and innovation capital (Xu and Liu, 2020).
Despite these criticisms, VAIC has gained popularity amongst the researchers for IC calculation because of the following reasonsfirst, it is an efficacious and easily applicable model for gauging IC, and to make inter-firm and also intra-firm comparison (Smriti and Das, 2018). Second, the model is widely used just because of its simplicity and easy availability of the data (Dzenopoljac et al., 2017). Third, it is based on audited published financial reports of the company making it more acceptable (Bontis, 1998;Pulic, 2000). Last, Weqar et al. (2020) argue that VAIC is the most appropriate technique for measuring IC performance of the business organisation.

Control variables.
Two control variables are also incorporated into the study. These variables are as follows: (1) Size: Firm size is ascertained by the natural log of total market capitalisation. It controls the effect of size on the creation of wealth through economies of scale, bargaining power and monopoly (Ghosh and Mondal, 2009;Kamath, 2008;Riahi-Belkaoui, 2003). Algebraically Size ¼ LogðMarket CapitalisationÞ (2) Physical capital (PC) intensity: PC is employed in the study to control the effect of fixed assets on organisational performance because the underlying postulation here is that fixed assets positively affect the firms' financial performance. It is measured by dividing the net fixed assets with the total assets of the company (Pal and Soriya, 2012;Smriti and Das, 2018;Weqar et al., 2021). Algebraically

Regression models
Six regression models have been formulated to measure the impact of IC efficiency (VAIC) and its components (CEE, HCE and SCE) on the financial performance (ROA, MB and ROE) of the Indian companies. Models 1, 3 and 5 explore the link between VAIC and business performance of the Indian firms. Models 1, 3 and 5 are used to test the hypothesis H1.
Models 2, 4 and 6 examine the association between the components of VAIC and the financial performance of the Indian firms. Models 2, 4 and 6 are used to assess the hypotheses H1a, H1b and H1c.
Here, ROA it , MB it and ROE it is the return on assets, market-to-book ratio and return on equity for the firm i at time t, respectively; α is the constant; β 1 to β 5 is the slope of the independent variable and control variable; e it is the error term; VAIC it , CEE it , HCE it , and SCE it is value Intellectual capital and business performance added intellectual coefficient, capital employed efficiency, human capital efficiency and structural capital efficiency for the firm i at time t, respectively; Size it and PC it is the size and physical capital intensity for the firm i at time t, respectively.

Descriptive statistics
The descriptive statistics of the dependent, independent and control variables are shown in Table 2 (https://drive.google.com/file/d/1tGjEvg6rIbclFkneyyj_hDF_I6lhVnKj/view? usp5drivesdk). The mean value of ROA is 10.89, indicating that, on average, Indian firms are earning a profit at the rate of 10.89%. The maximum value of MB is 20.13, representing that a company is valued 20 times more than its actual book value. Table 2 (https://drive. google.com/file/d/1tGjEvg6rIbclFkneyyj_hDF_I6lhVnKj/view?usp5drivesdk) also shows that amongst the three components of VAIC, HCE is the major contributor (Smriti and Das, 2018).

Correlation analysis
To know the relation between the variables and its strength, the authors performed the correlation analysis in the study. Table 3 (https://drive.google.com/file/d/1tGjEvg6rIbclFkneyyj_ hDF_I6lhVnKj/view?usp5drivesdk) shows the correlation matrix of the study variables. Here CEE shows a significant positive correlation with ROA, MB and ROE of the Indian firms while HCE is substantial only for ROA and MB but in the negative direction. Moreover, SCE is significantly negatively associated only with MB of the Indian firms. The highest coefficient of correlation is noticed between VAIC and HCE, i.e. 0.996, but it will not create the problem of multicollinearity as these two variables are not used simultaneously in the same model.

Regression analysis 5.3.1 Diagnostic test.
Since our data-set encompasses numerous observations per business organisation, therefore the effect of unobserved heterogeneity due to business level is a worry. Thus, this paper engages a fixed-effect model to obtain company-specific features (Baltagi, 2005). Furthermore, the authors examined the problem of multicollinearity in the data by employing the variance inflation factor (VIF). The authors found that there is no problem of multicollinearity in the data as the value of VIF is below the threshold level of 10 (untabulated). Gujarati and Porter (2010), state that the VIF above the value 10 possesses the problem of multicollinearity in the data. Additionally, the Breusch-Pagan/Cook-Weisberg test was performed for examining the problem of heteroscedasticity, while the Wooldridge test examined the problem of autocorrelation. The results of these two test are presented in Table 4 (https://drive.google.com/file/d/1tGjEvg6rIbclFkneyyj_hDF_I6lhVnKj/view? usp5drivesdk), which shows that the values are significant, indicating the presence of heteroscedasticity and autocorrelation amongst the residuals. Therefore, the data were analysed through fixed-effect regression analysis.

Regression results.
To get an in-depth understanding of the relation between the VAIC and the firm financial performance, a fixed-effect panel data regression analysis was performed by the authors. Table 5 (https://drive.google.com/file/d/1tGjEvg6rIbclFkneyyj_hDF_I6lhVnKj/ view?usp5drivesdk) shows that in all the models of ROA, MB and ROE, the value of adjusted R 2 upsurges when VAIC is apportioned into its three dimensions, i.e. CEE, HCE and SCE (Clarke et al., 2011;Ginesti et al., 2018). Now the authors will adopt the policy of general to specific. So first, we will measure the effect of VAIC on the firm performance, then we will segregate VAIC into its three constituents, for examining its impact on the financial performance of the business organisation. In Table 5 (https://drive.google.com/file/d/1tGjEvg6rIbclFkneyyj_hDF_I6lhVnKj/ view?usp5drivesdk), VAIC is significantly and positively associated with ROA, MB and ROE. Amongst the three constituents of VAIC, CEE is the most vital component, as it has a strong positive influence on ROA, MB and ROE of the Indian firms at 1% significance level. Furthermore, HCE shows a significant positive liaison with ROA, ROE and MB at 1, 5 and 10% level of significance, respectively. Likewise, SCE positively enhances the ROA of the Indian firms but has an insignificant effect on its MB and ROE.
6. Discussion and contribution 6.1 Discussion of findings The empirical results of the fixed-effect regression analysis efficaciously establish a substantial affiliation of IC efficiency and its component with ROA, MB and ROE of the Indian firms. The results of the models 1, 3 and 5 show that VAIC is positively associated with the firms' financial performance, indicating that IC plays a vital role in enhancing and    augmenting the profitability and market value of the firms in the developing countries (Sardo and Serrasqueiro, 2017;Smriti and Das, 2018). The empirical results of this study are consistent with the findings of Nimtrakoon (2015), Al-Musali and Ku Ismail (2016) and Ginesti et al. (2018) and thus leads to the acceptance of hypothesis H1. The findings of this study also validate the RB theory given by Wernerfelt (1984) in the Indian context, which states that possession of strategic resources offers an opportunity to an organisation in accomplishing the competitive advantage over its competitors. Amongst the components of VAIC, CEE shows a significant positive association with ROA, MB and ROE of the Indian firms and thus the hypothesis H1a is accepted. This indicates that physical and financial capital plays a crucial role in driving-up the financial performance of Indian companies. The finding is in line with the results of Chen et al. (2005) and Nadeem et al. (2017) who also report that physical and financial assets (tangible assets) enhance the firms' performance.
Regarding the influence of HCE on the financial performance of the Indian firms, the result establishes a substantial positive liaison amid HCE and ROA, MB and ROE of the organisation. Thus, hypothesis H1b is accepted. This demonstrates that a firm with a higher value of HC can generate more profit, and valued higher in the market than its rivals. The results of this study are supported by the findings of Komnenic and Pokraj ci c (2012), Afroz et al. (2018) and Xu and Liu (2020) who show that an efficient HC of an organisation improves the financial performance of the business organisation.
Results of models 2, 4 and 6 also show that SCE is positively linked with ROA while remaining insignificant for MB and ROE of the Indian firms. It leads to the partial acceptance of H1c. The analysis indicates that Indian firms are utilising their internal resources like their process, patents, systems, databases, relationship with the stakeholder, etc., in the generation of its profitability only. The outcome favours the result of Firer and Williams (2003) and Dzenopoljac et al. (2017). They also report that SCE is insignificant for MB while showing a positive relationship with the ROA of the business organisation of South Africa and the Arab region, respectively.

Contribution to the study
The current paper has contributed to the knowledge of IC in many ways. Firstly, it has added knowledge to the existing work on IC. According to the regression results, IC efficiency was found to have a significant and positive association with the traditional indicators of organisational financial performance. However, the individual components of IC efficiency (VAIC) which include CEE, HCE and SCE proved to be a better modelling tool than cumulative IC. Nevertheless, these results cannot be generalised because of the stochastic nature of IC.
The human capabilities and capacities vary from person to person and so do IC from organisation to organisation, which makes result unfit for being called universal and uniform. Two control factors have also been incorporated into the studyfirm size (size) and physical capital (PC) intensity. Out of two, size affects the financial performance of the business organisation (MB and ROE only) which implies that in designing the research model for investigating the financial performance of a firm, this factor needs to be either controlled or taken as the central research parameter.
There is a peculiar inclination of investors and companies towards investing in the physical assets, and human resource development is not paid as much attention as it deserves. One apparent reason is that physical assets can be transferred in and out of the territory within no time; however, IC takes time to grow. Today's economy is a knowledgebased economy and mere relying on physical assets can prove disastrous for the performance of the company in the long run. Therefore, attention is required from both the government and management to fill this policy gap.

Intellectual capital and business performance
Education and awareness about the importance of IC must be raised, and this can be possible only with the joint contribution of the local business leaders, academicians, government officials and other stakeholders. To raise the significance of IC usage in the business organisation, it must be made mandatory to disclose their IC in the annual reports of the company.

Conclusion
Based on the fixed-effect panel data regression results deliberated in the prior segments, it can be said that the effect of IC on the traditional measures of the financial performance of the companies comprising S&P BSE Index is positive and significant. The study and sample surveyed have been able to provide a definite and conclusive association between IC efficiency and organisational performance. The authors have applied Pulic (2000) VAIC TM methodology for quantifying and measuring the efficiency of the IC of the firm. Amongst the VAIC constituents, the efficiency of physical capital (CEE) and human capital (CEE) were the most significant contributors to the firms' financial performance. These findings suggest that the companies fascinated in attaining higher ROA, higher market value and a higher ROE, should escalate their responsiveness towards employees' knowledge, talent, experience, skill and attitude along with their tangible assets. These results are consistent with the vast body of literature that considers IC as a strategic asset for achieving the competitive advantage and generating vale-addition to the business organisation (Chen et al., 2005;Clarke et al., 2011;Edvinsson and Malone, 1997;Ghosh and Maji, 2015;Smriti and Das, 2018).
The study will prove a noble cradle of references for the forthcoming studies on IC, especially in the Indian context. However, the study is not fully exhaustive. It carries certain limitations as well. Firstly, the period taken for the research is only 10 years, which if increased, can give better and fair results. Secondly, the data of only 30 companies have been utilized for the analysis purpose, which most probably are the big giants of their respective industries. Hence the result cannot be generalised to all the firms. Finally, the present study measures financial performance by taking into consideration only its three indicators; therefore, in future, other variables of financial performance should also be included. Further studies can be conducted on the companies listed in different stock exchanges of India and other Asian countries with advanced statistical tools and techniques.