Intellectual capital efficiency, ownership structure and firm performance: The moderating role of the board of directors

Several studies on the effect of intellectual capital (IC) and ownership structure on firm performance had been conducted. However, their results in emerging nations such as Malaysia had remained uncertain and ambiguous due to inconclusive findings. Thus, this study examined the effect of IC and ownership structure (family, government and foreign ownership) on firm performance. The modified value-added intellectual coefficient (M-VAIC) model was utilized to measure IC efficiency inclusive of two new components (relational and innovation). In addition, this study also examined the composite measure of the board of directors' effectiveness as a moderator in the associations between IC, ownership structure and firm performance. This study employed a balanced panel data of 409 non-financial firms (2,045 firm-year observations) from 11 sectors listed on the Main Market of Bursa Malaysia over the period of five years (2016-2020). This study used the generalized method of the moment (GMM) to address the issues of endogeneity, autocorrelation and heteroscedasticity. The empirical findings revealed that IC efficiency was significant and positively associated to the performance of the Malaysian non-financial firms. Additionally, this study found that the ownership structure played a crucial role in improving the value and enhancing performance for Malaysian non-financial firms. Moreover, the board of directors' effectiveness significantly moderated the association between IC efficiency and ownership structure with firm performance. The results of this study could help managers in building new and innovative methods to get ahead competitively among non-financial firms by using the IC as a premise. The results would also be useful for directors and managers in developing new policies that will improve the corporate governance mechanisms, particularly on the ownership structure and board of directors' effectiveness.