Intellectual capital performance in Indian banks: a panel data analysis

Barman N.

This study examines the nexus between profit efficiency, intellectual capital and income diversification in 25 Indian scheduled banks from 2007–2008 to 2021–2022. It employs Banker–Charnes–Cooper (BCC)–data envelopment analysis (DEA) to estimate profit efficiency, the modified value-added intellectual coefficient framework to determine the intellectual coefficient and a two-step generalized method of moments model to obtain robust and reliable estimation results. The estimation results show that intellectual capital and income diversification are complementary assets that can help banks to improve their profit efficiency. However, it is also found that the beneficial effect of intellectual capital becomes weaker or less impactful as income diversification increases in a highly competitive market. To improve bank performance, the study suggests that the bank’s policymakers, regulators and management authorities take necessary steps to augment the efficiency level of human capital and relational capital. Furthermore, a balanced approach to income diversification is recommended to mitigate potential adverse consequences through a proactive strategy formulation.

Balcı N.

The success of organizations is evaluated by measuring performance. This chapter examines the financial performance of banks in Azerbaijan. The analysis was carried out using the SECA method, based on the information obtained from the official websites of 23 banks operating in Azerbaijan in 2022. The SECA method is a multiple-decision method in which performance evaluation and the weighting of the decision criteria are determined simultaneously. Indicators of liquidity, capital adequacy, and profitability are used as decision criteria. Despite the growing number of studies on performance measurement, there is still a gap in the application of multiple decision-making methods in the banking sector. This chapter is structured as follows: Initially, literature related to the banking sector in Azerbaijan and SECA analysis is presented. Subsequently, the methodology employed in the SECA method is elucidated. Following this, there is an examination of the financial performance of banks operating in Azerbaijan. Finally, the study's findings are assessed by drawing on relevant literature.

Veluthedan S.P., Kiran K.B.

Purpose: The aim of this study is to examine the impact of Digital Financial Services (DFS) on the productivity of banking sector in India.   Theoretical framework: This research considered various digital banking services offered by bank and how it affects the actual bank performance in terms of productivity, by adopting a two-stage model i.e., Malmquist Productivity Index (MPI) and panel data regression.   Design/Methodology/Approach: The empirical study was based on eight-year balanced panel data from 2012 to 2020. The sample of the study consists of forty-four commercial banks from India. This study is completely based on secondary data collected from the website of the database of the Indian economy and the National Payment Corporation of India (NPCI). To achieve the research goals, a two-stage approach has been used. Initially, Malmquist Productivity Index (MPI) was employed to estimate the total factor productivity changes. In the second phase, panel regression analyses were used to study the impact of Digital Financial Services (DFS) on bank productivity.   Findings: The findings show that the Digital Financial Services (DFS) variables such as mobile banking, online banking, Automatic Teller Machines (ATM) and Point of Sale (POS) transactions are significantly improved the productivity of the Indian banking industry.   Research, Practical & Social implications: The study addresses the issues such as identifications of factors affecting the productivity of banks including Digital Financial Services (DFS). In the world of digital revolution, it analyses whether bank can retain, continue and enhance their performance by offering modern product and services to their customers.   Originality/Value: This article has conducted extensive analyses of Digital Financial Services (DFS) and banks' productivity. The authors also provide suggestions for the policymakers for the future implementation of digital banking services.

Chinnasamy G., Madbouly A., Vinoth S., Chandran P.

Purpose This study aims to identify the impact of intellectual capital (IC) on the bank’s performance using a cross-country approach with India and Gulf Cooperation Council (GCC) countries using the Skandia navigator model (SNM). Design/methodology/approach This study uses a mixed-methods research approach by taking financial and non-financial measures to assess the impact of the IC on the bank’s performance using the SNM. The study implies an analysis of the data from the top ten banks in India and twenty banks in GCC countries. The selection was done based on the volume of the bank’s business for three years (2019–2020, 2020–2021 and 2021–2022). Findings The research has three main findings: there is a positive impact of IC on the bank’s performance; amongst the factors of SNM, there is a direct impact of human capital and customer focus on the performance of the selected banks in both India and GCC countries; and the other factors of SNM such as structural capital and process focus, renewal and development focus also affect the selected banks. Research limitations/implications The outcomes of the research may be useful for policymakers in India and GCC countries, as it identifies IC components that have a significant impact on the bank’s performance. This might enable them to develop policies that foster such factors, which, consequently, will improve the performance of the banks in the selected countries. Originality/value This study is an attempt to fill the gap in the existing literature on IC and bank’s performance for two different types of countries using the SNM.

Majumder M.T., Ruma I.J., Akter A.

PurposeThis paper attempts to evaluate the impact of intellectual capital on bank performance in Bangladesh.Design/methodology/approachThe authors analyze an unbalanced longitudinal data of 32 banks, which cover 318 observations of bank-year from 2010 to 2019. The study employs a dynamic panel model with the two-step system generalized methods of moments (SGMM).FindingsThe results show that bank performance is significantly positively affected by the intellectual capital (IC) in Bangladesh. In addition, the findings show that capital employed efficiency (CEE) is an essential determinant of bank performance rather than structural capital efficiency (SCE) and human capital efficiency (HCE) for the Bangladeshi banking sector.Originality/valueThis work is unique as no one has explored the impact of intellectual capital on Bangladesh's bank performance. The findings suggest that business owners, managers and policymakers who want to improve the efficiency of their organizations should spend continuously on IC and expand their investment into CEE, which includes both financial and physical resources, in order to obtain better bank performance.

Rahman M.J., Liu H.

PurposeThis study aims to examine the impact of intellectual capital (IC) and its three components (human, structural and relational capital) on corporation performance in the Chinese transportation industry. In addition, this study also investigates auditor characteristics (both Big-N and non-Big-N auditors) as a moderating role to examine the relationship between IC and corporate performance.Design/methodology/approachThe data include 398 firm-year observations of transportation companies listed on the Shanghai and Shenzhen Stock Exchange from 2011 to 2020. Value-added intellectual coefficient (VAIC) model and its modified version (MVAIC) are applied to measure IC efficiency. Finally, the fixed effects regression analysis is used to mitigate the endogeneity issue. To investigate the moderating effect of auditor characteristics, the authors divide the samples based on the clients audited by Big-4 and non-Big-4 firms.FindingsThis study reveals that IC can enhance firm performance in China’s transportation sector. Overall, findings indicate that on the whole, IC has a positive and significant impact on corporation profitability and productivity. Human capital and physical and financial assets (capital employed) play highly important roles, but structural capital has no significant impact. The authors also found that auditor characteristics play an important moderating role in the connection between IC and corporate performance. For example, the positive association between IC and corporate performance is more pronounced when Big-4 auditors audit client firms. At the same time, the authors found a negative relationship between IC and firm performance when non-Big-4 auditors audit client firms.Practical implicationsManagers must understand that several components of IC have a total effect on corporate financial performance. Therefore, managers can dedicate more resources to such components based on the performance outcomes to emphasize their business strategies.Originality/valueThis study is the first empirical analysis of the impact of IC and its components on corporation performance in the transportation sector in China, an emerging market. Previous studies mainly focus on developed countries’ high technology and financial industries sectors but the impact of IC in transportation industry largely remains unknown. Thus, the present findings contribute to IC literature by revealing several underlying mechanisms by which the components of IC help achieve good firm performance.

Akorede H.

Harjanto N., Rahmawati R., Djuminah D., Muthmainah M., Nurim Y.

This study uses human capital that shows the intangible asset’s core in reducing the risk or improving firm performance to solve previous inconsistent results of women’s role in firm performance. Thus, this paper examines the role of human capital as the mediator in the influence of gender diversity on credit risk in a rural bank. This examination involves 433 rural banks based on the purposive sampling method. The result reveals that higher gender diversity has higher human capital (α = 0.135, ρ = 0.005) and higher human capital has lower credit risk (α = –0.205, ρ = 0.000). It also revealed that when gender diversity is controlled by human capital as a mediator on credit risk, gender diversity does not affect credit risk (α = –0.022, ρ = 0.625). However, human capital still affects credit risk (α = –0.205, ρ = 0.000). It implies that the higher a woman on the board of directors, the lower the credit risk through her education competence. Women as organization leaders have high self-appreciation from organization members in implementing their strategies and supervising them. High credit risk in rural banks needs appropriate management as a part of an internal governance mechanism. This study contributes to gender diversity literature through the ability to manage risk in measuring women’s role as strategic agents. This study also contributes to investor protection through the reputation of women on boards as monitoring agents.

Zhang L., Yu Q., Jin Z., Xu J.

This paper examines how investment in intellectual capital (IC) elements by textile and apparel companies improves firm performance measured in terms of profitability, market value, and productivity. The modified value-added intellectual coefficient (MVAIC) model is applied to measure IC. Using a panel of 35 Chinese textile and apparel companies for a six-year period (2013–2018), the results show that physical and human capitals are the strong factors that contribute to firm performance. In addition, relational capital negatively influences profitability and market value, and structural capital and innovation capital have a negative impact on employee productivity. We also find that the MVAIC model performs better in measuring IC than the original value-added intellectual coefficient (VAIC) model. This paper can provide some insights for corporate managers to enhance firm performance and gain competitive advantage by proper utilization of IC in traditional industries.

Li G., Luo Z., Anwar M., Lu Y., Wang X., Liu X.

Intellectual capital has been grabbed the attention of researchers due to its momentous role in sustainable competitive advantage and organizational success. There is a growing catalog of related assessments, publications and reviews that display the direct and indirect role of intellectual capital in business success and profitability. Despite the bourgeoning literature, studies have not yet unleashed the influence of each dimension of intellectual capital; human capital, structural capital and customer capital on SMEs' efficiency with financial resources as a moderator. The present study fills the gap and assesses if financial resources strengthen the paths between the dimensions of intellectual capital and SMEs' efficiency. A survey method was used and collected evidence from 264 Chinese SMEs. The findings exhibit that human capital directly enhances SMEs' efficiency but the presence of financial resources as a moderator weakens the influence. However, social capital and customer capital do not directly improve SMEs' efficiency but financial resources reinforce the paths social and customer capital and SMEs efficiency. This research recommends that owners and managers of SMEs need to use their financial resources complementary with structural and customer capital while human capital should be used exclusively.

Vidyarthi H., Tiwari R.

PurposeThe purpose of this paper is to estimate the economic (namely cost, revenue and profit) efficiency and its association with intellectual capital of 37 BSE-listed Indian banks over the period 2005–2018.Design/methodology/approachThis study employs truncated Tobit regression to compute the relationship between intellectual capital and estimated cost, revenue and profit efficiency using Data Envelopment Analysis (DEA) for the 37 BSE-listed Indian banks within the panel data framework.FindingsEstimates suggest that banks’ overall annual average cost, revenue and profit efficiency are 0.4466–0.7519, 0.4825–0.8773 and 0.4905–0.8803, respectively, during the sample period. Further, Tobit regression results indicate that the aggregate intellectual capital (value-added intellectual coefficient or Modified Value-added Intellectual Capital) has a positive but minimal impact on these efficiency parameters at 1 percent significance level for the overall sample as well as public sector banks. Among all the sub-components of intellectual capital, human capital, structural capital and relational capital have a positive and moderate impact on these efficiency measures for the overall sample. Control variables, particularly bank size, are significant drivers of the estimated efficiency of banks.Research limitations/implicationsFindings suggest that banks should invest adequately to enhance their overall intellectual capital to further augment these economic efficiency measures in the long run.Originality/valueThis study computes cost, revenue and profit efficiency of 37 BSE-listed banks based on DEA followed by intellectual capital using the Pulic approach (1998 and 2000) and the Bontis (1998) approach in the first stage. Later, it examines the dynamics between the computed efficiency parameters and intellectual capital using Tobit regression within the panel data framework.

Oppong G.K., Pattanayak J.K., Irfan M.

Purpose The purpose of this paper is to empirically investigate the effect of intellectual capital (IC) efficiency on changes in the productivity of insurance companies in Ghana. Design/methodology/approach Using a panel of 33 insurance companies from 2008 to 2016, the study applied Value Added Intellectual Coefficients model as a measure of IC efficiency, whilst Malmquist Productivity Index is employed to capture changes in the productivity of insurance companies. In estimating the effects of IC on productivity, System Generalised Method of Moment (GMM) is applied because of its power over endogeneity and heteroscedasticity. Findings Robust empirical findings on productivity analysis showed that improvements in insurer’s productivity were experienced in three year intervals out of the overall studied year. In addition, panel regression results revealed that IC along with human capital and capital employed significantly affect the productivity of insurance companies. Research limitations/implications The generalisability of the study findings could be questioned because it is limited to insurance firms operating in Ghana; some firms were omitted due to mergers and acquisition that reduced the final sample. Yet, the findings facilitate the validation of IC concept and, hence, informs manager/policy makers on IC utilisation as a source of competitive edge. Practical implications Having robust empirical findings, the study expands on the existing literature by unveiling the dynamic nature of IC relationship and productivity. The findings also serve as a benchmark for managers/policymakers in insurance companies to increase the operational efficiency by investing in IC, which will help guarantee improve returns on generated premiums. Originality/value Although a few studies have investigated the effect of IC in Ghana, this study is the first to examine the dynamic relationship between IC and changes in productivity in a Ghanaian context.

Oppong G.K., Pattanayak J.K.

In this current knowledge-based economy, firms' productivity and competitive advantage are no longer based on physical and financial assets but on intangible assets. This has compelled knowledge-intensive firms to look for a more reliable source for higher productivity and competitive advantage by focusing on their intellectual capital, which cannot be easily imitated. As banks are classified as knowledge intensive, this study examines investment in intellectual capital by banks and examines how it has improved bank productivity measured in terms of asset turnover (ATO) and employee productivity (EP). Using a panel of 73 commercial banks in India for a 12-year period (2006–2017), the study found that some components of intellectual capital improves productivity, and others do not.

Pedro E., Leitão J., Alves H.

Purpose The purpose of this paper is to determine the predominant classification of intellectual capital (IC), in terms of components, using the literature of reference on the relationship between IC and performance and considering multi-dimensional analysis axes (MAAs): organisational, regional and national. Design/methodology/approach A systematic literature review (SLR) is presented focussing on empirical studies on IC published in the period 1960-2016. A protocol for action is defined and a research question is raised, gathering data from the databases of: Web of Science, Scopus and Google Scholar. A social network analysis is also provided to determine the type of networks embracing groups, IC individual components and performance type. Findings Of the 777 papers included in the SLR, 189 deal with the relationship between IC and performance. The paper highlights the greater development of empirical studies starting from 2004; the organisational MAA is the most studied. The most frequently used groups of components in studies dealing with IC’s influence on performance corresponds to a triad of human capital; structural (organisational or process) capital; and relational (social or customer) capital, which determine positively the performance of organisations/regions/countries, but their influence is not linear and depends on various factors associated with the context and surrounding environment. Practical implications This study has wide-ranging implications for politicians/governments, managers and academics, providing empirical evidence about the relationships between the components of IC and performance, by MAAs, and a global vision and better understanding of how those IC components have developed and how they are related to performance. Originality/value Due to the high number of references covering a wide range of disciplines and the various dimensions (e.g. organisational, regional and national) that form IC, it becomes fundamental to carry out an SRL and systematise its MAAs to deepen knowledge about what has been discovered/developed in this domain, in terms of empirical studies, in order to situate the topic in a wider theoretical-practical context. The paper is exceptionally wide-ranging, covering the period 1960-2016. It is one of the first clarifying studies on systemisation of the literature on IC, by MAA, and an in-depth study of IC’s impact on the performance of organisations/regions and countries which may serve as a guideline for future studies using the taxonomy proposed.