ISSN: 2225-8329
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The purpose of this paper is to empirically investigate if intellectual capital has an impact on profitability while considering the interaction effect of human capital efficiency. The data are drawn from LEAP market of Bursa Malaysia over the three-year period of 2017 to 2019. Modified Value Added Intellectual Coefficient (MVAIC) method is applied to measure intellectual capital and return on asset (ROA) as a proxy for profitability. The empirical findings, after controlling for firm size and leverage, indicate that intellectual capital is positive and significantly associated with profitability. However, the results show a mixed relationship between MVAIC components and profitability. The findings reveal positive and significantly association between human capital efficiency (HCE), capital employed efficiency (CEE) and ROA. Structural capital efficiency (SCE) has significant but negative relationship with ROA. While, relational capital efficiency (RCE) is proven to be statistically insignificant with ROA. However, when HCE interact with SCE and RCE, the results show that HCE moderates positively the effect of SCE and RCE on ROA. This is among the few studies that explore an empirical relationship between intellectual capital and profitability in the context of Malaysian SMEs and making a novel contribution in considering an interaction variable. However, the study examines one country and one industry, therefore, limit the generalisation of findings.
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In-Text Citation: (Mohammad, 2021)
To Cite this Article: Mohammad, H. S. (2021). The Interaction Effect of Human Capital Efficiency on the Nexus between Intellectual Capital and Profitability: Evidence from Malaysian SMEs. International Journal of Academic Research in Accounting Finance and Management Sciences, 11(1), 183-200.
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