IMPACT OF INTELLECTUAL CAPITAL ON THE FIRM RISK EVIDENCE FROM NON-FINANCIAL MANUFACTURING COMPANIES LISTED IN PAKISTAN

Abstract

Intellectual capital (IC) has been identified as a key factor in determining corporate risk in the knowledge era. Analysis ofthe relationship between IC and its components and firm risk of non financial manufacturing companies listed on the Pakistani stock exchange is the primary objective ofthe current study. This study adopts the modified value-added intellectual coefficient (MVAIC) model to evaluate IC using data from 40 non-financial manufacturing enterprises between 2015 and 2021. The findings demonstrate that IC raises the overall firm risk. By using their IC effectively, finn managers may be able to increase performance overall and take calculated risk which would provide long-term opportunities and benefits to the firm. Also, the volatility in the share prices can go in favor of the company if the managers of the company manage their risk efficiently and take calculated risk which lie under the healthy risk-taking strategy. Therefore, the managers ofthe company play a significant part when it comesto riskiness ofthe company because they make a decision and take a choice of how much risk should the company take, that would result beneficially and contribute to the success ofthe firm.