Purpose – The purpose of this paper, which is written in two parts, is to investigate empirically if intellectual capital (IC) has an impact on the financial aspects of organisational performance as well as attempting to identify the IC components that may be the drivers for the leading financial indicators of listed companies. The study sought evidence from the companies of the Hong Kong Stock Exchange.

Design/methodology/approach – Using data of all the constituent companies of the Hang Seng Index of the Hong Kong Stock Exchange from 2001 to 2005 and the VAIC™ methodology used in the measurement of IC by Pulic, regression models were constructed to examine the relationships between IC and the selected financial performance measures of these companies. The research hypotheses and research method are detailed in Part 1 of the paper. In this paper – Part 2, the results and findings of the investigation are analysed and discussed.

Findings – The results of the analysis revealed no conclusive evidence to support a definitive association between IC, as measured by VAIC™, and the four measures of financial performance in the sample companies surveyed in Hong Kong. At best, only a moderate association was recorded between IC and the profitability measures. The study further revealed that physical capital is highly regarded by the companies surveyed for enhancing market valuation, productivity and profitability.

Research limitations/implications – Evidence from Hong Kong shows that there is an overall lack of association between IC and financial performance, which contradicts some prior studies conducted overseas. This may suggest that Hong Kong may be lagging behind, for example, some Asian competitors such as Taiwan and Singapore in IC development. In addition, the empirical results suggest that physical capital continues to play a prominent role in the territory, which may be an indication of Hong Kong's ongoing reliance on “tangibles” as the strategic asset to generate corporate performance. These findings may, however, illustrate that the association between IC and financial indicators such as market valuation may not be a universal and uniform one. Rather, the association may vary from market to market, probably depending on the level of IC awareness in the investors.

Originality/value – It is believed that this is the first study conducted in Hong Kong involving the use of VAIC™ for the measurement of IC. It not only contributes to the knowledge of IC research, but adds to the existing literature of the progress of IC development in relation to financial performance in companies internationally.

Capital markets, Financial performance, Hong Kong, Intellectual capital, Stock exchanges