Intellectual Capital Measurement: Using the Earnings Per Share Model of Quoted Insurance Companies in Nigeria

Abstract

The earnings per share of insurance companies may be influenced by the intellectual capital capabilities of such firms. Intellectual capital is the aggregate of the workers’ efforts towards the growth of an enterprise. The purpose of this study is to evaluate the extent to which these efforts may affect the earnings per share model of quoted insurance firms in Nigeria. Ex-post facto research design was used for the secondary data selection. Using the purposive sampling technique, 150 workers were used as the target population selected from the human resources, accounts and marketing departments of 18 active insurance companies.150 questionnaires were distributed to the respondents with a response rate of 74%. To validate the measuring instruments, face validity, content validity and pilot tests were employed. The result from the primary data revealed that the effect of human capital was negatively insignificant on EPS (P>0.05). The result from the secondary data showed that structural capital had insignificant negative effect on EPS (P>0.05).
The study concluded that human capital (HC), structural capital (SC) and relational capital (RC) each had a statistical insignificant relationship with earnings per share (EPS) of insurance companies in Nigeria. The study recommended that a standard on intellectual capital accounting be issued by the International Financial Reporting Committee (IFRC) to enable firms measure and record their intellectual capital values as they relate to earnings per share in their income statements.
Key words: Intellectual capital; Financial performance; Insurance firms; Earnings per share; Value added intellectual capital