Does intellectual capital impact the financial performance of Indian public sector banks? An empirical analysis using GMM

Monika Barak () and Rakesh Kumar Sharma ()
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Monika Barak: Thapar Institute of Engineering and Technology
Rakesh Kumar Sharma: Thapar Institute of Engineering and Technology

Palgrave Communications, 2024, vol. 11, issue 1, 1-11

Abstract: Abstract This study examines the impact of intellectual capital (IC) on the financial performance (FP) of Indian public sector banks (IPSBs) between 2010 and 2021. This paper utilizes the modified value-added intellectual coefficient (MVAIC) approach to measure IC. It employs a panel data estimation approach, specifically the generalized method of moments (GMM), to investigate the connection between IC and the FP of public sector banks in India. The findings indicate that IC, along with its sub-elements of human capital (HC), capital employed (CE), structural capital (SC), and Relational capital (RC) have a notable positive or negative influence on various FP indicators, including return on assets (ROA), return on equity (ROE), return on capital employed (ROCE), earnings per share (EPS), and market performance (Tobin’s Q). Furthermore, the combined IC, as evaluated through the modified value-added intellectual coefficient (MVAIC), has a notable and favorable impact on ROA and ROE. The leverage variable exhibits a negative and significant impact on the financial indicators, indicating that an increase in debt leads to a decrease in the bank’s value. This study aims to assist stakeholders and policymakers in identifying the key elements of IC and determining an appropriate distribution among them to achieve sustainable FP and value generation in Indian IPSBs.

Date: 2024
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DOI: 10.1057/s41599-024-02702-5

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