Intellectual Capital and its Effect on Financial Performance of Banks: Evidence from Saudi Arabia

Al-Musali, Mahfoudh Abdul Karem; Ismail, Ku Nor Izah Ku

doi:10.1016/j.sbspro.2014.11.068

Cited by 125 publications

(164 citation statements)

References 20 publications

Supporting

Mentioning

108

Contrasting

Unclassified

Order By: Relevance

“…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%

“…Using a sample of 5749 US banks over the period 2005-2012, Meles, Porzio, Sampagnaro and Verdolive [69] applied pooled ordinary least square (OLS) and found a positive impact of VAIC and its component, i.e., HCE, but an insignificant impact of SCE on ROA. Using a sample of 11 Saudi banks over the period 2008-2010, Al-Musali and Ismail [68] applied linear regression and found a positive impact of VAIC and its components, i.e., HCE and CEE, but an insignificant impact of SCE on ROA. Using a sample of 15 banks in the UAE over the period 2004-2010, El-Bannany [28] applied multiple regression and found a positive relationship between ROA and VAIC.…”

Section: Ic and Performance Of Financial Institutionsmentioning

confidence: 99%

See 1 more Smart Citation

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

et al. 2019

View full text Add to dashboard Cite

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...

show abstract

Section: Ic and Performance Of Financial Institutionsmentioning

confidence: 99%

Section: Ic and Performance Of Financial Institutionsmentioning

confidence: 99%

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

et al. 2019

View full text Add to dashboard Cite

show abstract

“…Previous research found that there are several variables that influence the performance of Islamic banks such as corporate social responsibility (CSR) disclosure (Sidik andReskino, 2016, Platonova, 2016), intellectual capital (Al-Musali, et al, 2014;Ousama and Fatima, 2015), and sharia Supervisory board (Mollah and Zaman, 2015). Platonova, et al (2016) analyzes the impact of corporate social responsibility (CSR) disclosure and financial performance of islamic banks in GCC country.…”

Section: Dita Andraeny Dessy Diana Putrimentioning

confidence: 99%

“…The study of Al-Musali, et al (2014) attempts to examine the impact of intellectual capital on financial performance of the banks in Saudi Arabia. The results show that VAIC influence financial performance.…”

Section: Dita Andraeny Dessy Diana Putrimentioning

confidence: 99%

Islamicity Financial Performance Index in Indonesian Islamic Banks

Andraeny

Putri²

2017

Shirkah

View full text Add to dashboard Cite

This study aims to critically analyze the effect of islamic social reporting, intellectual capital and the sharia supervisory board on islamicity financial performance index of Islamic Banks in Indonesia during 2011-2015. The samples of this study are ten islamic commercial banks that were initially selected by using purposive sampling method. Islamicity financial performance index was used as a measure of financial performance of Islamic banks which are consist of profit sharing ratio, zakat performance ratio, equitable distribution ratio, and islamic income versus non islamic income ratio. The analysis technique performed in this study is partial least squares. The results of this research revealed that islamic social reporting, intellectual capital and sharia supervisory board have positive and significant effect on islamicity financial performance index of Islamic banks.Keywords: islamic social reporting, intellectual capital, sharia supervisory board, islamicity financial performance index

show abstract

“…Örnek and Ayas (2015), for instance, studied the relationship between intellectual capital, innovative work behavior and business performance reflection. Al-Musali et al (2014) performed a survey on intellectual capital and its effect on financial performance of banks by looking into some evidences from Saudi Arabia. They reported that IC performance of Saudi banks was low and it was positively related to bank financial performance indicators.…”

Section: Introductionmentioning

confidence: 99%

The impact of intellectual capital on firm performance: Evidence from Tehran Stock Exchange

Matinfard¹,

Khavari²

2015

10.5267/j.msl

View full text Add to dashboard Cite

Intellectual Capital and its Effect on Financial Performance of Banks: Evidence from Saudi Arabia

Cited by 125 publications

References 20 publications

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

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

Islamicity Financial Performance Index in Indonesian Islamic Banks

The impact of intellectual capital on firm performance: Evidence from Tehran Stock Exchange

Contact Info

Product

Resources

About