DETERMINANTS OF INTELLECTUAL CAPITAL EFFICIENCY: EMPIRICAL EVIDENCE FROM INSURANCE COMPANIES IN ETHIOPIA

Abstract

For organizations to thrive in a digital and knowledge-driven economy, intellectual capital is essential. However, there has been a lack of attention given to the factors that affect intellectual capital efficiency (IC efficiency) in Ethiopian insurance companies, which have not been thoroughly examined. Therefore, this study aims to investigate the factors that affect the IC efficiency of insurance companies in Ethiopia. The study used an explanatory research design with econometric panel data from sixteen insurance companies from 2013-14 to 2022-23. The random effect estimation technique was employed to identify the variable with the highest significance level. The study used a modified value-added intellectual coefficient (MVAIC) approach to measure the IC efficiency of insurance companies as a dependent variable and profitability, risk, barriers to entry, leverage, human resource intensity, company size, and company age as explanatory variables. The study revealed that profitability, risk, human resource intensity, and age have a positive and significant effect on the IC efficiency of insurance companies. In contrast, barriers to entry, leverage, and size negatively and significantly impact insurance companies' IC efficiency. The evidence might help managers and insurance regulatory bodies address the issues that influence IC efficiency to enhance its performance and ultimately optimize its value creation.