Intellectual capital, growth opportunities, and financial performance in European firms: Dynamic panel data analysis

Purpose The purpose of this paper is twofold: first, to analyse the impact of intellectual capital (IC) and growth opportunities on firms' financial performance as well as the moderating effect of IC on the relationship between growth opportunities and financial performance; and second, to analyse the impact of IC on growth opportunities. Design/methodology/approach The current study uses a sample of non-financial listed firms consisting of 14 Western European countries for the period between 2004 and 2015. The estimation method used is specifically the Generalised Method of Moments system (1998) estimator, a dynamic panel estimator. Findings The results reveal that the IC efficiency of the current period has a positive impact on the financial performance of high-, medium- and low-tech European firms. A non-linear relationship was found between growth opportunities and financial performance. Also, findings suggest that the positive relationship between growth opportunities and financial performance is enhanced with the efficient use of firms' IC. Results indicate that the efficient use of IC in the current period has a greater impact on growth opportunities in high firms. Additionally, results reveal the presence of a non-linear relationship between ownership concentration and growth opportunities. Originality/value The current study contributes to the current literature by exploring a sample of firms across Western European countries, which is divided among high-, medium- and low-tech firms. The econometric modelling enables the author to conduct a longitudinal study.