Does investing in intellectual capital improve productivity? Panel evidence from commercial banks in India

Oppong, Godfred Kesse; Pattanayak, J. K.

doi:10.1016/j.bir.2019.03.001

Cited by 71 publications

(87 citation statements)

References 28 publications

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“…Firer and Williams [1] also emphasized the importance of PC in improving the sustainable performance of an institution. However, previously, many studies reported the positive impact of CEE on performance [4,6,12,18,[32][33][34]39,41,52,58,63,67,71,75,77], while some reported no relationship between CEE and performance [1,10,35,37,38,43]. We thus, pose the following hypothesis:…”

Section: Cee and Performancementioning

confidence: 76%

“…However, the literature about examining the impact of IC on the performance of financial institutions is limited to an extent. Many researchers used VAIC and reported the positive impact of IC on the performance of the financial sector in different countries [4,6,10,12,28,30,31,33,35,39,40,45,52,[68][69][70][71][72][73][74]. For instance, using a sample of 38 Indian banks over the period 2005-2016, Vidyarthi [40] applied Tobit regression and found a positive impact of both IC measures, i.e., VAIC, MVAIC, and their component, i.e., HCE, on efficiency.…”

Section: Ic and Performance Of Financial Institutionsmentioning

confidence: 99%

“…Further, using the data of 73 Indian commercial banks over the period 2006-2017, Oppong and Pattanayak [33] applied fixed effect (FE) regression and found a positive impact of VAIC and its components, i.e., CEE, HCE, and SCE, on productivity, i.e., ATO. Using a sample of 18 Ghanaian banks over the period 2003-2011, Alhassan and Asare [72] found a positive impact of VAIC on productivity.…”

Section: Ic and Performance Of Financial Institutionsmentioning

confidence: 99%

“…Curado, et al [84] also stated that IC is a good predictor of future banking performance. Previously, a large body of literature provided a positive relationship between IC and performance [12,30,31,33,35,[39][40][41]45,52,63,67,69,73,74]. However, Haris, Yao, Tariq, Malik and Javaid [4] argued that the positive relationship between IC and performance depends upon the efficient use of intangible resources, which are difficult to control, and therefore, the relationship between IC and performance could be nonlinear.…”

Section: Ic and Performancementioning

confidence: 99%

“…IC has been classified into different components and measured by different methodologies [11,13,14,16,[22][23][24][25]. However, the advanced one, i.e., value-added intellectual coefficient (VAIC), developed by Pulic [24], is used in this study as a measurement of IC.Many studies have provided evidence regarding the relationship between IC and performance in different countries [4,18,[26][27][28][29][30][31][32][33][34][35][36][37][38][39][40][41][42][43][44]. However, evidence from financial institutions is still scarce.…”

mentioning

confidence: 99%

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Intellectual Capital, Profitability, and Productivity: Evidence from Pakistani Financial Institutions

et al. 2019

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The idiosyncratic and knowledge-intense nature of the financial institutions requires them to rely more on intangible than on tangible resources. Over the past two decades, researchers have been motivated to embark on the relationship between intellectual capital (IC) and performance of financial institutions. Considering the knowledge-based intellect as a critical skill of this era, the current study examines the impact of IC on the performance of 111 Pakistani financial institutions (PFIs) over the period 2007-2018. Two IC measures, i.e., value-added intellectual coefficient (VAIC) and modified value-added intellectual coefficient (MVAIC), were applied to examine the impact of IC on profitability and productivity. Robust results from the fixed effect regression and generalized method of momentum affirm the inverted U-shaped relationship between IC and performance, suggesting that the increase in IC performance of PFIs increases their profitability and productivity up to a certain level, and after that, a further increase in IC performance decreases profitability and productivity. The results further suggest that human capital is the most influencing intellectual resource which produces higher intellectual efficiencies and increases the performance significantly. The results of this study are likely to be helpful for management, regulators, policy makers, and academics and provide insights into the importance of IC and suggest that the investment in the IC improves the sustainable performance to a certain extent.Sustainability 2019, 11, 3842 2 of 30 (IC) was first published in 1969 by John Kenneth Galbraith [8]; since then, the development and the existence of IC have been considered significant to the performance and sustainability of FIs [9].Modern FIs operate in a more challenging and dynamic environment due to technological advancement, continuous innovation in systems and processes, fast-changing customer preferences, and intense competition [10]. Unlike the nonfinancial sector, the operational success, growth, and sustainability of the financial sector do not rely more on tangible assets. As the financial sector provides a range of diversified financial services, therefore, it relies more on IC elements which are intangible in nature, like advanced systems, processes, skills, expertise, supportive culture, environment, knowledge, and information [4]. IC is believed to be a key force to value creation, hidden behind the book value of institutions [11,12]. In order to understand the concept of IC, it can be explained as the combination of structure capital and human capital [11,13]. Structure capital is based on customer and organization capital. Customer capital refers to potential intangibles such as knowledge embedded in suppliers, customers, related industry associations or the government [13]. Organization capital refers to intangibles such as knowledge embedded within the routines of an institution, systems and processes, supportive culture, information systems, transaction times, and procedural innova...

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