Abstract:
The demand for disclosure of non-financial information, including the disclosure of intellectual
capital, has been increased by its wider users. However, those disclosures are still voluntary since
their benefits are vague. The study aims to identify how intellectual capital disclosure influences the
firm‟s financial performance of Sri Lankan listed banks. Intellectual capital is a vital element to
service providing organization since it determines the service quality of the firms. Many firms
nowadays voluntarily disclose their intellectual capital to signal the market and get legitimacy from
society. Therefore, it could improve the firm performance. To ensure that, the study computes the
intellectual capital disclosure index of all 11 listed banks throughout 2015-2019 based on the
information gathered from annual reports and website. Firm performance was measured in two ways.
Return on asset was used to measure the firm financial performance, while TobinsQ was employed to
measure the firms‟ market performance. Multiple linear regression was used to test the hypotheses of
the study. The result reveals that ICD positively influences the return on asset and Tobin‟s Q. The
finding of the study is significant to the policymakers of the banks to ensure the sustainability of the
banks, which is vital to the national economy. Besides, knowledge of the benefits of ICD assists the
policymakers to develop a framework for ICD to initiate the mandatory practices. Further, it provides
evidence to the managers about the positive side of ICDs, which encourages them to focus on more
IC development and disclosure. This study also contributes to the existing literature mainly based on
the developing context. This study is new since its studied how ICD enhance financial and market
performance, especially in the listed banks in Sri Lanka.
Keywords: Listed banks; Firm performance; Intellectual capital; Intellectual capital disclosure
