INTELLECTUAL CAPITAL AND FIRM PERFORMANCE OF LISTED FIRMS IN NIGERIA: MODERATING ROLE OF CORPORATE GOVERNANCE

The low performance of Nigerian firms despite investment in intellectual capital is a major concern. While studies have shown that corporate governance practices strengthens the subsisting relationship between investment in intellectual capital and performance in the developed economies, this moderating effect in Nigeria is yet to be adequately explored as research focus is limited to possible effects of intellectual capital and performance. It is against this background, this study investigated the moderating role of corporate governance on the relationship between intellectual capital and performance of listed non-financial companies in Nigeria. The study adopted ex-post facto research design, and data were drawn from the audited annual reports of fifty (50) listed non-financial firms for a period of 2007 to 2017. Multiple regression techniques were employed to test the relationship among the variables. The results of the study revealed that both intellectual capital and corporate governance drive financial performance as the relationship is found significant in all components. The study concluded that corporate governance moderated the effect of investment in intellectual capital on financial performance. The study recommends that Board of directors should adopt measurable corporate governance mechanism which strengthens and helps in investment strategy that increases and improves performance. Also, there is need to entrench corporate governance as a control strategy and impetus towards attaining organization’s goals. -----The results of the analysis of the explicatory variables are shown in this table. The results indicated that the variables were not exhibiting serious correlation with one another. This informed the inclusion of all the explanatory variables in the model. level of significance of the variables. ***, ** and *reveals that variable is significant at 1%, 5% and 10% respectively.


Introduction
The changeover to digital economy has brought home the idea of adding intellectual capital to the measurement of organizational performance (Marr, Schiuma & Neely, 2004). For any organisation to optimally utilise its human resources, emphasis must be given to the workability of intellectual capital in the organisation as a critical factor for a competitive edge and its contribution to the organisational result. Intellectual capital gained impetus because of groundbreaking study of Pulic (1998) measuring the nexus of intellectual capital and performance of companies.
The recent trends in the world as it relates to the development of the knowledge-based economy, as well as economic events (such as economic crisis, constant innovation and so on) is a pointer to the need for investment in intellectual capital and such investment in Nigeria and international community have made competition intense among both local and multinational business corporations. The Nigeria Petroleum Development Company (NPDC), Exxon Mobil, Access Bank Plc., Unilever Plc, Chevron Plc., are the leading firms. For instance, over N40 million was invested in 2008 in the training of Unilever Plc's employees. Exxon's main business unit spent $117 million in workforce preparation in 2014 to retain its strategic edge in the industry (ExxonMobil Corporate Citizenship Report, 2014).
The global economic recession has a ripple effect on the performance of Nigerian firms despite investment in intellectual capital. This has become a major concern for investors, stakeholders, accounting professionals. In spite of the essentiality of intellectual capital, extant literature shows that the results from empirical research remained contradictory and inconsistent. For example, studies such as Chen, Cheng & Hwang (2005); Clarke, Tan, Plowman & Hancock, (2007); ; Alipour (2012) report that intellectual capital significantly affects firm efficiency whereas Chan (2009); Firer & Williams, (2003) among others do not at all report any significant relationship.
Extant literature has proved that investing in human capital is not a guarantee of high performance except corporate governance mechanism is put in place to ensure efficient and effective management of organization's resources. Board of directors must buckle up in his oversight function to ensure effective decision making and management of economic resources which is key and crucial to the attainment of organizational goal. It is clear in the literature the significant role that can be played by corporate governance in driving economic value and enhancing performance of economic units.
Today, the relationship between investment decisions, either physical or intellectual capital, and performance is seen to be strengthened with the presence of corporate governance. The adoption of measurable corporate governance mechanism helps in investment strategy that increases and improves performance. There is ongoing campaign for the need to entrench corporate governance as a control strategy and impetus towards attaining organization's goals. Studies have confirmed a structural shift in corporate governance and high level of compliance among firms in Nigeria (Akinkoye and Olasanmi, 2014).
Studies have also shown a common ground between financial performance and the corporate governance, While in Africa most especially in Nigeria; there are few empirical evidences on corporate governance activities. In addition, some prior studies would either investigate the role or consequence of intellectual capital on financial performance whilst some looked at the influence of corporate governance activities on corporate performance. Meanwhile, this study combined intellectual capital with corporate governance as a moderating variable either influencing financial performance positively or negatively relating it to non-financial companies in Nigeria. Adegbite (2012) made available certain evidence to back-up the view that a nation's peculiar institutional arrangements influence its principal model and style of corporate governance regulations. Hence, scarcity of empirical corporate governance studies in Africa as a whole and Nigeria in particular is a major concerned. There seems to be very few studies in Nigeria on the moderating role of corporate governance on the link between intellectual capital and financial performance. Some other studies conducted in Nigeria only examined the impact of individual corporate governance variable on performances (e.g. Adetunji & Olawoye, 2009;Adegbite, 2012;Akinkoye & Olasanmi, 2014). The clashing evidences may partially be described by the fact that previous studies suffered from procedural problems, less unrepresentative size sample, and untenable choices for the proxy of company's performance and inapt time frames.
Most studies (Anuonye, 2015;Onyekwelu et. al., 2017;Nwaiwu & Nwaekpe, 2018) looked at the influence of intellectual capital on firms' performance neglecting the corporate governance variables such as board characteristics and the ownership structure despite its moderating roles as enacted by the code of corporate governance. This study introduces a moderating variable of corporate governance mechanisms such as audit committee size, board size, proportion of attendance in meeting and proportion of independent directors in audit and risk committee which has not been tested before in a Nigerian context in relation to intellectual capital and financial performances. The interplay or the interaction among the concerned variables particularly the moderating role played by corporate governance is yet to be adequately examined, hence the need for this study.

Literature Review Conceptual Review Intellectual Capital
Intellectual capital is the knowledge-based assets which the organization focuses on to increase its efficiency of the financial performance. It is further categorized into human, structural and customer capital. Human capital is the mixture of innate legacy, education, experience and attitude about life and business, structural capital in the form of managerial procedures is the serious connection which allow intellectual capital to be dignified organization level while customer or relational capital is the combination of assets used by business in relating with its past, present and potential customers, with its network of suppliers or research and development partners, in addition to the perceptions and views that they hold about the company (Brannstrom & Giuliani, 2009).
Performance of firms is ultimately important to investors, stakeholders and the economy at large. Investors cherish their returns on investment and well-performing firms enjoy stakeholders' loyalty (Selvam, Gayathri & Vansanth, 2016).

Corporate Governance
According to OECD (2004), it is the relationship that exists between the owners, management and other relevant stakeholders of a firm, which influences the formation of its objectives and how performance is measured. Bezawada (2020) defined corporate governance as the organizational structure that seeks to enhance the achievement of corporate objectives.

Theoretical Review
The Knowledge-Based theory underpins this study. The Knowledge-Based theory was propounded by Stalk in 1992. The theory assumes that the competitive ability of any firm is based on capabilities and competencies which are driven by knowledge. According to Marr and Schiuma (2004), organizational capabilities are based on knowledge and since knowledge is a resource that forms the foundation of company capabilities, the ownership of specific knowledge provides organization with specific capabilities. They noted that the possession of knowledge enables specific capabilities and hence, only the management of the knowledge will help an organization identify, maintain and refresh its competencies in the short and long run (Surdarsanam et. al., 2013). This study can therefore be related to this theory as the knowledge acquired by firms are the intellectual capital and the firms can enhance their performance based on the knowledge by harnessing its Human Capital Efficiency (HCE), Structural Capital Efficiency (SCE) and Capital Employed Efficiency (CCE).

Empirical Review
Aftab, Khurshid and Yousaf (2019) investigated connection between intellectual capital and market value of 79 quoted non-financial companies spanning from 2010 to 2015 using regression analysis techniques. Value Added Intellectual Coefficient (VAIC) model was used for the computation of intellectual capital. Tobin's Q was employed as a proxy for firm value. Managerial ownership was tested as a moderator. Findings revealed positive significant relationship between intellectual capital and firm value while managerial ownership moderates the relationship between intellectual capital and firm value negatively. Olayiwola (2018) studied the influence of corporate governance on the performance of 10 Nigerian quoted companies from year 2010 to 2016 using regression analysis techniques. The corporate governance was proxied with board size, audit committee size and board composition while performance was proxied with net profit margin. The study revealed that board size had a strong negative relationship with net profit margin, board composition had a significant positive correlation with net profit margin, audit committee size had an insignificant correlation with net profit margin and board size, audit group size and composition of board significantly influence net profit margin. Study concluded that smaller board size increase performance and the board composition ought to consist more of the nonexecutive directors and constant review of audit committee. Aslam et al. (2018) assessed effect of corporate governance and intellectual capital on firm's performance and corporate social responsibility disclosures of Australian Stock Exchange (ASX) listed companies. Their study employed Partial Lease Square Structural Equation Modeling (PLS-SEM) method for 10 different sectors with 26 industry group in year 2014. Findings showed Australian companies are more environmental-friendly because of sound corporate governance practiced. Also, results revealed that both corporate governance and intellectual capital are related with improved firms' financial performance of companies.
Shahveisi and Khairollahi (2017)  Sakariyahu and Jimoh (2016) studied the influence of corporate governance practices on the performance of 12 quoted firms on the ASeM in Nigeria for the period of 2009 to 2015 using regression analysis techniques. The findings revealed strong effect of corporate governance variables on performance of companies listed on the ASEM at 5% level of significance. This study concluded that corporate governance practices are an essential factor that determines firms' performance. Their study recommended that organizations must strictly comply with corporate governance principles; maintain moderate board size and ensure independence of audit committee as prescribed by international standards. Strict adherence to Securities and Exchange Commission code of governance is also vital as this would help instil boost performance of the firms listed on ASeM and generally improve the image of the Nigerian business environment. Basyith (2016) investigated the influence of corporate governance and intellectual capital on firm performance of 120 firms on Indonesian listed companies from 2009 to 2013. His study adopted non-linear Generalized Method of Moments (GMM) and Standard Least Square method. Findings revealed strong influence of corporate governance on firm performance. Pongpearchan (2016) investigated influence of intellectual capital on company performance of 925 businesses in Thailand during the year 2015. The study employed a structured questionnaire with stratifies random sampling method using five-point Likert's scale. Regression analysis technique was employed and findings showed significant influence of organisation capital on value creation.

Methodology
The study adopted longitudinal research design. This was because it accommodates a significant pool of data collection and increases the precision of the estimate obtained from the sample, due to the large number of observations from the panel data. Financial Performance was measured using return on asset and return on equity while intellectual capital was proxy by human capital, structural capital and customer capital. Also, corporate governances were proxies by Audit committee size, board size, proportion of attendance in meeting, audit committee meeting, proportion of independent directors in the audit and risk committee and log of managerial ownership structure. The study population comprised 80 listed non-financial companies on Nigerian Stock Exchange (NSE). Using purposive sampling, the sample size of fifty (50) listed non-financial firms was selected and data were extracted from their annual audited accounts and reported between 2007 and 2017. The study employed multiple regression analysis.

Model Specification
This study employed baseline model adapted from Ahangar (2011) and Kurfi et al. (2017) which was in line with the Knowledge-based Theory. The baseline model functional relationship among performance, intellectual capital and corporate governance was given in the model below: . = ( , )

numbers of years the companies is in operation LEV
=Leverage is the total debt to equity ratio

Results and Discussion Descriptive Statistics
This section reveals the analysis of the moderating role of corporate governance on the relationship between intellectual capital and financial performance of quoted nonfinancial companies in Nigeria. The results of the analysis are shown in Table 1, 2 and 3. Table 1 below presents the descriptive analysis of the data. Audit committee size, leverage, board size etc. Audit committee size (AS) had a Mean value of 5.444, a median of 6.00 coupled with maximum and minimum value of 8.00 and 0.000 respectively. This, therefore, means that the values are too closely netted due to the nature of the variables. In the same vein, the mean and median of Audit committee meetings (ACM) is 3.45 and 4.00 respectively with a maximum and minimum value of 8.00 and 0.000. Also, its standard deviation is 0.944 and skewness is 0.122 while the Kurtosis is 5.56. The board meeting (BMT) mean value is 3.62 while the median is 4.00. The standard deviation BMT indicates low level of dispersion among the firms, while LEV reported the one of the highest level of dispersion in the sampled firms with mean of 2.20 and median of 1.305. Age of the firm was expected to be dispersed. Age (AGE) report mean of 47 years and median of 48 years over the sampled period. The board size (BS) also report low level of dispersion owing to the strict regulation prevailing the corporate governance structures of most companies in Nigeria. The correlation matrix shows the relationship between the dependent and the independent variables. The result also shows the relationship that exists between the independent variables and further shows symptoms of multi-collinearity if any. The result obtained shows that there exists a relationship between the dependent variable and the independent variables which signifies that the independent variables can influence or affect the dependent variables. Table 2 demonstrates that the regressors are not multi-collinear.   Table 3 presents the results of regression of the moderating role of corporate governance on the relationship between intellectual capital and financial performance of quoted non-financial companies in Nigeria. The model was estimated using Fixed Effect and Random Effects assumption. 50 quoted non-financial companies from 2007 to 2017 were sampled. Return on Assets (ROA) was used as a measure of performance. Corporate Governance Variables were Audit Committee Size (AS), Board Size (BS), Audit Committee Meeting (ACM), Proportion of Independent Directors in Audit and Risk Committee (BIND_AR) and Managerial Ownership Structure (LMO). However, in order to reduce the tendency of weak parameters, Hausman test for correlated random effects was conducted to provide the best model estimates for the data (see Table 3 for result) and consider if the variance in the estimates of the random and fixed effect models are significant to cause biasness of the model parameters. The Hausman test (Chi-Sq. statistics) rejects the null hypothesis that unobserved firm specific heterogeneity are uncorrelated with explanatory variables and so, the study employed the Fixed Effect Method (FEM) which is the most appropriate model to interpret the result of the analysis.

Discussion of Findings
Human Capital Efficiency (HCE) showed a value of 0.22 which implied a positive relationship with ROA (t=2.1617, p<0.05). This showed that the non-financial firms listed at the Nigeria Stock Exchange (NSE) between 2007 and 2017 on average of 0.22 funds for the labours that can create value added. The positive relationship between ROA and Human Capital efficiency indicated the ability of Human Capital to efficiently aid the profitability and create value in the company. Also, optimal utilization of human resources leads to competitive advantages that may ultimately improve the financial performance and corporate value.
Structural Capital Efficiency (SCE) showed an average coefficient of 0.28. The variable had positive relationship with ROA (t=2.3288, p<0.05). This showed that SCE contributed 0.280 in the firm value creation. Capital employed efficiency (CEE) had positive significant effect on ROA (t=12.9183, p<0.05). This indicated that the high value of CEE leads to increasing profitability in non-financial firms of Nigeria. Human capital efficiency (HCE) had positive relationship with ROA (t=2.1617, p<0.05). Leverage ratio had positive relationship with ROA (t=2.5309, p<0.05). Corporate Governance (CG) had moderating effect on the relationships between intellectual capital and the firm performance through the capital employed efficiency (t=2.7389, p<0.05), human capital efficiency (t=2.2293, p<0.05) and also structural capital efficiency (t=2.1051, p<0.05). Strong corporate governance system serves as a good platform to induce efficiency in the firm. The F-statistics test of the significance of the model indicates that the model was statistically significant at 5% level of significance. The R 2 coefficient was used in determining the coefficient of determination of the model, the R 2 value of 0.42, implied that about 43 percent of variation in ROA was explained by changes in selected firm-specific variables.
Findings of this study agree with the findings of Hamadan et. al., (2017) which asserted that corporate governance significantly influenced intellectual capital and firms' financial performance. Also, the findings of this study are supported by the findings of Aslam et. al., (2018) which concluded that both corporate governance and intellectual capital are related with improved firms' financial performance and Afab et. al., (2019) which concluded that there is a positive and significant relationship between intellectual capital and firm value while moderating variable of ownership structure as a corporate governance mechanism has a negative impact on firm value. 0.0000 0.0000 Hausman Test 33.167563(p<0.05) This table shows the regression statistics of moderating role of corporate governance on the relationship between intellectual capital and performance of quoted non-financial companies in Nigeria with the level of significance of the variables. ***, ** and *reveals that variable is significant at 1%, 5% and 10% respectively. Source: Author's Computation (2020)

Conclusion and Recommendations
The study investigates the moderating role of corporate governance on the relationship between intellectual capital and performance of quoted non-financial companies in Nigeria during an eleven years period. Thus, the results from the study indicate that that corporate governance had moderating effect on the relationships between intellectual capital and the firm performance through the capital employed efficiency (t = 2.7389, p < 0.05), human capital efficiency (t = 2.2293, p < 0.05) and structural capital efficiency (t = 2.1051, p < 0.05). This study has its own limitation because it is only carried out on quoted non-financial companies and the result cannot be used to generalize what happened in other sectors like financial institutions and service oriented firms. Also it only makes use of financial performance measures while non-financial performance measures that may explain the situations also were not included. Finally, the study recommends that Board of directors should adopt measurable corporate governance mechanism which strengthens and helps in investment strategy that increases and improves performance.