Intellectual Capital, Profitability, and Productivity: Evidence from Pakistani Financial Institutions

Hongxing Yao, Muhammad Haris, Gulzara Tariq, Hafiz Mustansar Javaid and Muhammad Aamir Shafique Khan
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Hongxing Yao: School of Finance and Economics, Jiangsu University, Zhenjiang 212013, China
Gulzara Tariq: School of Finance and Economics, Jiangsu University, Zhenjiang 212013, China
Hafiz Mustansar Javaid: College of Management, Shenzhen University, Shenzhen 518060, China
Muhammad Aamir Shafique Khan: School of Management, Jiangsu University, Zhenjiang 212013, China

Sustainability, 2019, vol. 11, issue 14, 1-30

Abstract: The idiosyncratic and knowledge-intense nature of the financial institutions requires them to rely more on intangible than on tangible resources. Over the past two decades, researchers have been motivated to embark on the relationship between intellectual capital (IC) and performance of financial institutions. Considering the knowledge-based intellect as a critical skill of this era, the current study examines the impact of IC on the performance of 111 Pakistani financial institutions (PFIs) over the period 2007–2018. Two IC measures, i.e., value-added intellectual coefficient (VAIC) and modified value-added intellectual coefficient (MVAIC), were applied to examine the impact of IC on profitability and productivity. Robust results from the fixed effect regression and generalized method of momentum affirm the inverted U-shaped relationship between IC and performance, suggesting that the increase in IC performance of PFIs increases their profitability and productivity up to a certain level, and after that, a further increase in IC performance decreases profitability and productivity. The results further suggest that human capital is the most influencing intellectual resource which produces higher intellectual efficiencies and increases the performance significantly. The results of this study are likely to be helpful for management, regulators, policy makers, and academics and provide insights into the importance of IC and suggest that the investment in the IC improves the sustainable performance to a certain extent.

Keywords: intellectual capital; profitability; productivity; financial institutions; Pakistan (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

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