Intellectual capital and financial performance: Case of the emerging market banks

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Abstract

Using the value added intellectual capital (VAIC) this study aims to investigate the impact of intellectual capital (IC) on the performance of Jordanian banks listed in the Amman Stock Exchange (ASE) during the years 2005-2018. Two empirical models were designed to test the effect of VAIC, and its three components including capital employed efficiency (CEE), human capital efficiency (HCE) and structural capital efficiency (SCE) on banking performance. The results of the study show that there is a significant and positive relationship between VAIC and banks profitability presented by return on assets (ROA). Meanwhile, when VAIC is split into components, SCE, CEE and HCE have a significant and positive impact on banks performance. Yet, CEE has more influence on performance compared to HCE and SCE. This study contributes to the literature as well as practitioners in financial institutions by providing evidence on the influence of intellectual capital on banks performance in an emerging economy, Jordan, in which its national vision and strategy emphasize the importance of intellectual capital in sustaining its economic growth.

Keywords: Intellectual Capital, Financial Performance, VAIC, ROA, Jordanian Banking Sector

Authors’ individual contribution: Conceptualization – H.Y. and A.A.; Methodology – H.Y. and A.A.; Investigation – H.Y. and A.A.; Resources – H.Y. and A.A.; Writing – H.Y. and A.A.; Supervision – H.Y. and A.A.; Funding Acquisition – H.Y. and A.A.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: O34, G00, G21, E24

Received: 20.11.2020
Accepted: 26.01.2021
Published online: 27.01.2021

How to cite this paper: Yaseen, H., & Al-Amarneh, A. (2021). Intellectual capital and financial performance: Case of the emerging market banks. Journal of Governance & Regulation, 10(1), 35-41. https://doi.org/10.22495/jgrv10i1art4