The impact of intellectual capital formation and knowledge economy on banking performance: a case study of GCC’s conventional and Islamic banks

Abstract

Purpose This paper aims to evaluate the impact of intellectual capital in terms of human capital, structural capital and capital employed on the financial performance of Islamic and conventional banks in the Gulf Cooperation Council (GCC) countries. Design/methodology/approach Along with the measurement discussion, the empirical analysis examines the relationship between intellectual capital measured through value-added intellectual coefficient (VAIC) and the financial performance of banks in the GCC states by conducting a panel of six GCC countries, including 24 Islamic banks and 32 conventional banks covering 2012–2020 period. Findings This paper shows that while Islamic banks have similar VAIC, human capital efficiency and capital employed efficiency results to conventional banks, Islamic banks have lagged behind conventional banks regarding the impact of structural capital on financial performance. It is argued that this is in contradiction with Islamic ontology and epistemology, which essentialises intellectual capital formation. Practical implications Islamic banks should promote research and development for their intellectual capital at the product, operational and institutional levels, as Islamic banking is considered an alternative financing method, incorporating a new form of knowledge-based institutions inspired by capitalist institutions. Originality/value This study conducts a comparative examination of the intellectual capital performance and its impact on financial performance by using interaction variables to capture any differences between Islamic banks and conventional banks in the GCC countries. The paper also considers the knowledge economy impact as a novelty, which is prominent for the GCC countries. In addition, Islamic ontology’s essentialisation of knowledge and its articulation in the form of intellectual capital within modern understanding is widely discussed, as part of originality. Finally, the findings are located within Islamic ontology and epistemology.

Does the Efficiency of a Firm’s Intellectual Capital and Working Capital Management Affect Its Performance?

“…A comprehensive analysis of recent sample research articles investigating ICE's impact of ICEs on firm performance published from 2008 to 2022 is presented in Table 1.. This review suggests that IC positively affects firm performance (Akkas & Asutay, 2022;Aljuboori et al, 2022;Chatterjee et al, 2022;Dalwai & Salehi, 2021;Gupta et al, 2022;Hamdan, 2018;Isola et al, 2020;Kweh et al, 2022;Lu et al, 2021;Maji & Hussain, 2021;Nkambule et al, 2022;Tiwari, 2022;Yousaf, 2021). A general trend suggests that many of these studies mostly investigate firms by sector in developing countries.…”

Does intellectual capital in Islamic banks outperform conventional banks? Evidence from GCC countries

“…In the extant literature, limited studies have explored the relationship between IC and bank performance in emerging economies. Moreover, among the studies that have examined the IC–financial performance nexus, only a few have done so in the context of the GCC countries (see Akkas and Asutay, 2022a, b; Buallay, 2019; Ousama et al. , 2019; Sarea et al.…”

“…, 2019). Nevertheless, none of these scholars consider all GCC-listed banks (Islamic and conventional) for longitudinal periods (except Akkas and Asutay, 2022a; b), multiple measures of IC (i.e. the value-added intellectual coefficient [VAIC] and the modified value-added intellectual coefficient [MVAIC]) and multiple accounting and market-based performance measures or uses a large set of control variables.…”

“…Consequently, studies that ignore endogeneity/causality problems may yield spurious, unreliable results (e.g. Akkas and Asutay, 2022a, b; Buallay, 2019). Therefore, it is of critical importance to revisit the relationship between measures of IC and the financial performance of Islamic and conventional banks in the GCC countries from a comparative perspective by using advanced econometric methods to address endogeneity/causality problems and by including a large set of corporate governance and control variables.…”

An empirical Study on Impact of Intellectual Human Capital on Corporate Social Innovation

“…Most studies found a relationship between Intellectual Human Capital (IHC) and Corporate Social Innovation (CSI). For example, Akkas and Asutay (2022) study the purposes of estimating the impact of Intellectual Capital (IC) through Human Capital (HC), Structural Capital (SC), and Employed Capital (EC) on the financial activity of Islamic banks in the Gulf Cooperation Council (GCC) countries. The value-added intellectual coefficient (VAIC) is used to measure IC, as it was from 2012 to 2020 by 24 Islamic banks and 32 conventional banks.…”