Quantile effects of intellectual capital on financial distress: panel threshold insights into capital structure regimes

Purpose This study aims to investigate how intellectual capital (IC) affects financial distress across varying levels of firm vulnerability, while accounting for capital structure thresholds. It fills a critical gap in the literature by exploring whether IC's effect is homogeneous across distress levels and how leverage conditions this relationship, areas previously underexplored, particularly in emerging markets like Nigeria. Design/methodology/approach Drawing on a panel of 76 non-financial firms listed on the Nigerian Exchange from 2012 to 2023, the study employs a hybrid methodology that combines panel quantile regression with panel threshold regression. This approach enables the capture of heterogeneous effects of IC across the distribution of financial distress while identifying critical leverage thresholds that alter IC's impact. Alternative measures of financial distress (Altman and Taffler Z-scores) and capital structure (debt-to-assets and equity-to-assets) are used for robustness. Findings The results indicate that the impact of IC on financial distress is not uniform but quantile-specific. IC contributes positively to financial resilience in healthier firms (higher quantiles), but its effect diminishes or turns negative in more financially constrained firms (lower quantiles). Moreover, the analysis reveals a nonlinear threshold effect: once leverage surpasses a certain point, the beneficial role of IC is significantly weakened. These findings hold consistently across different model specifications and distress proxies, highlighting the complex interplay between IC and capital structure under financial strain. Originality/value This study contributes to the intellectual capital and corporate distress literature by introducing performance management perspectives into the analysis of how intangible resources influence firm resilience. Specifically, it advances knowledge in three key ways: (1) it uncovers the heterogeneous effects of intellectual capital (IC) across varying levels of financial distress, showing how IC supports performance stability under differing financial pressures; (2) it identifies capital structure as a threshold mechanism through which leverage either strengthens or constrains the performance-enhancing role of IC and (3) it employs quantile-based econometric techniques that capture firm-level performance dynamics beyond conventional mean estimations. By situating the analysis within an emerging market context, the study provides new theoretical and practical insights into how firms can leverage intellectual capital for improved performance management and financial sustainability under capital constraints.