INTELLECTUAL CAPITAL AND BANKS PERFORMANCE: THE EMPIRICAL EVIDENCES FROM INDONESIAN ISLAMIC AND CONVENTIONAL BANKS

Abstract

Purpose- This study examines the influence of intellectual capital (IC) on bank performance measured by ROA, ROE and NIM.

Methodology- This study explores purposive sampling methods. Finannly, 10 Islamic banks and 30 Conventional banks were selected as a sample of this study for the period 2012-2016.

Findings- This study found that IC positively effect on bank performance that measured by ROA, ROE and NIM. In the context of IC dimensions, this study shows that HCE and CEE positively effect on bank performance that measured by ROA, ROE and NIM. Meanwhile, SCE positively affect to bank performance that measured by ROA only. The results of the study are sensitive to samples. For Islamic banks sub sample, this study found that IC positively effect on ROA, but it does not affect to ROE and NIM. HCE positively effect on ROA, but HCE negatively influence on ROE and HCE has no effect on the NIM. SCE negatively effect on ROA and ROE, but SCE has no effect on NIM. CEE Capital has a positive effect on ROA and NIM, but CEE has a negative effect on ROE. For conventional banks, IC has a positive effect on ROA and ROE, but IC does not affect the NIM. HCE and CEE have a positive effect on ROA, ROE and NIM. SCE has a positive effect on ROE, but SCE has a negative effect on the ROA and NIM

Conclusion- These findings indicate the optimum intellectual capital will be followed by better bank performance. However, the influencing of IC on bank performance is very susceptible to measurement and the sample.

Keywords

• Intellectual capital,human capital,structural capital,customer capital,bank performance

References

1. Al-Musali, M. A. K. and Ismail, K. N. I. K. (2014). Intellectual capital and its effect on financial performance of banks: Evidence from Saudi Arabia. Procedia - Social and Behavioral Sciences, 164, 201-207, DOI: 10.1016/j.sbspro.2014.11.068
2. Barney, J., (1991). Firm resources and sustained competitive advantage. Journal of Management, 17(1),99-120, DOI: 10.1177/014920639101700108
3. Bontis, N. (1998). Intellectual capital: an exploratory study that develops measures and models. Management Decision, 36 (2), 63-76.
4. Chan, K.H. (2009), Impact of intellectual capital on organizational performance: an empirical study of companies in the Hang Seng Index (Part 1), The Learning Organization, 16(1), 4-21, DOI: 10.1108/09696470910927641
5. Chen, M. C, Cheng, S. J. and Hwang, Y. (2005). An empirical investigation of the relationship between intellectual capital and firms market value and financial performance. Journal of Intellectual Capital 6 (2), 159-176.
6. Dzenopoljac,V., Janoševic, S., and Bontis, N. (2016). Intellectual capital and financial performance in the Serbian ICT industry. Journal of Intellectual Capital, 17 (2), 373-396, DOI: 10.1108/14691930510592771
7. El-Bannany, M., (2008). A study of determinants of intellectual capital performance in banks: the UK case. Journal of Intellectual Capital, 9(3), 487-498, DOI: 10.1108/14691930810892045
8. Gogan, L. M.,, Artene, A., Sarca, L., and Draghici, A. (2016). The Impact of Intellectual Capital on Organizational Performance. Procedia - Social and Behavioral Sciences 221, 194 – 202, DOI: 10.1016/j.sbspro.2016.05.106

9. Janosevic, S., Dženopoljac,V., and Bontis, N. (2013). Intellectual capital and financial performance in Serbian. Knowledge and Process Management, 20 (1), 1- 11, DOI: 10.1002/kpm.1404
10. Joshi, M., Cahill, D., Sidhu, J. and Kansal, M. (2013). Intellectual capital and financialperformance: an evaluation of the Australian financial sector. Journal of Intellectual Capital, 14(2), 264-285, DOI: 10.1108/14691931311323887
11. Mondal, A. and Ghosh, S. K.,. (2012). Intellectual capital and financial performance of Indian banks. Journal of Intellectual Capital, 13(4), 515-530, DOI: 10.1108/14691931211276115
12. Nawaz, T., and Haniffa, R. (2017). Determinants of financial performance of Islamic banks: an intellectual capital perspective. Journal of Islamic Accounting and Business Research, 8 (2); 130 – 142, DOI: 10.1108/JIABR-06-2016-0071
13. Nimtrakoon, S. (2015). The relationship between intellectual capital, firms’ market value and financial performance: Empirical evidence from the ASEAN. Journal of Intellectual Capital 16(3), 587-618, DOI: /10.1108/JIC-09-2014-0104
14. O’Donnell, D. ang O’Regan, P. (2000). The structural dimensions of intellectual capital: emerging challenges for management and accounting. Southern African Business Review: Special Issue on Information Technology, 4(2), 14-20.
15. Pulic, A. (2004). Intellectual capital-does it create or destroy value?. Measuring Business Excellence, 8(1), 62-68, DOI: 10.1108/13683040410524757
16. Pulic, A., (2000). VAIC™–an accounting tool for IC management. International Journal of Technology Management, 20 (5-8),702-714, DOI 10.1504/IJTM.2000.002891
17. Pulic, A. (1998). Measuring the performance of intellectual potential in knowledge economy. available at: www.vaic-on.net
18. Puntillo, P. (2009). Intellectual Capital and Business Perfomance: Evidance from Italian Banking Industry. Journal of Corporate Finance Research, 4(12), 97-115.
19. Razafindrambinina, D. and Anggereni, T. (2011). Intellectual Capital and Corporate Financial Performance of Selected Listed Companies in Indonesia. Malaysian Journal of Economic Studies, 48(1), 61-77.
20. Riahi-Belkaoui, A. (2003). Intellectual capital and firm performance of US multinational firms:a study of the resource-based and stakeholder views, Journal of Intellectual Capital, 4(2), 215-226, DOI: 10.1108/14691930310472839
21. Stahle, P., Stahle, S., dan Aho, S. (2011). Value added intellectual coefficient (VAIC): a critical analysis. Journal of Intellectual Capital, 12(4), 531-551, DOI: 10.1108/14691931111181715
22. Stewart, T.A. (1998). Intellectual Capital: The New Wealth of Organizations, Currency Doubleday, New York, NY.
23. Zeghal, D. and Maaloul, A. (2010). Analysing value added as an indicator of intellectual capital and its consequences on company performance. Journal of Intellectual Capital, 11(1), 39-60, DOI: 10.1108/14691931011013325