Impact of the Intellectual Capital on the Financial Performance of the Commercial Banks in Pakistan

Abstract

This empirical study implicates the impact of intellectual capital on the financial performance of commercial banks in Pakistan. The sample of fifteen banks was taken for the period of 2010-2019. Information collected was from the official websites of the respected banks financial statements. Pulic’s Value Added Intellectual Capital methodology was used which is considered as the best to analyze intellectual capital. The sub-domains for the Intellectual capital consist of capital employed, human capital, and structural capital. Further control variables were also analyzed as size (Natural log of Total Assets), LP (Labor Productivity) and MAS (Marketing Expenditures) to check impact on intellectual capital. The results regression analysis implicated that human capital, capital employed and structural capital have a positive and significant impact on the financial performance of commercial banks in Pakistan. The Study was conducted to enrich the literature of intellectual capital for the Pakistan’s commercial banking sector. The internal and external factors defined may help the bankers analyze the factors to consider which can contribute in enhancing the financial performance of the banks. Regressed results achieved in the study are more likely similar to the literature of Intellectual capital for banking sectors around the world. But there are empirical studies where intellectual capital has not shown any significant and positive results due to the economic conditions, certain geographical locations where education level is low or poor political conditions which disturbs the economic growth. This research has discussed many studies in literature for the diversified uses of the VAIC model and its implications on business sectors.