Explanation of Relationship between Corporate Governance and Intellectual Capital in Agency Theory Perspective: A Structural Equation Modeling Approach

Abstract

Intellectual capital as an intangible asset produced within a company could be regarded as a strategic asset that enables the company to create competitive advantage and superior financial performance. Because of lack of reporting the intellectual capital items in financial statements, there exists asymmetric information about the intellectual capital between company’s management and shareholders. This may raise agency costs. Since raise of corporate governance brings up alleviating agency costs, and then, intellectual capital related conflicts between company’s management and shareholders, in this study the relationship between corporate governance and intellectual capital was examined, regarding structural equation modeling approach in analyzing research data. Data was collected from 68 manufacturing companies listed in the Tehran Stock Exchange in the years 2006 to 2012. The results, after confidence of validation of the findings, showed that there is no significant relationship between corporate governance and intellectual capital.

Keywords

• intellectual capital
• corporate governance
• agency costs
• structural equation modeling