On intellectual capital and financial performances of banks in Malaysia

Abstract

The purpose of the study is to consider and measure the intellectual capital towards the financial performances of the local banks in Malaysia. The study will implement the Value Added Intellectual Coefficient (VAIC) method to evaluate the financial performances of the ten local banks in Malaysia. The study will determine how the intellectual capital influences the financial performances of banks in terms of two periods which are latest six years from 2011 to 2016 and the past ten years from 2007 to 2016. The regression analysis results to indicate that the components of intellectual capital have their influences towards the bank's financial performances indicators. Over the six years and ten years periods, Capital Employed Efficiency has the significant relationship on Return on Assets. For the Return on Equity, Human Capital Efficiency (HCE) has the significant relationship over the latest six years while Structural Capital Efficiency (SCE) has the significant relationship over the ten years. Then, SCE has the significant relationship towards the Leverage (LEV) for the latest six years compare to the past ten years whereby HCE has the significant relationship towards the LEV. These results determine that the banks need to focus on the three components of intellectual capital whereby all the three efficiencies have the influences to enhance the best financial performances in Malaysia's banking sector.

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

“…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:…”

“…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.…”

“…However, among other VAIC and MVAIC components, i.e., CEE, SCE, and RCE, they found different results. Using a sample of 10 local Malaysian banks over the period 2007-2016, Poh, Kilicman and Ibrahim [35] applied linear regression and found a positive impact of VAIC on ROA. However, among VAIC components, they reported different relationships during the periods 2007-2016 and 2011-2016.…”

“…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.…”

“…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.…”