Empirical Linkage of Intellectual Capital and Performance of Islamic Banks
Sarah Athirah Saruchi1, Nor Aiza Mohd Zamil2, Rohaida Basiruddin3, Siti Zaleha Abdul Rasid4, Nor Faezah Ghazi Ahmad5
1Sarah Athirah Saruchi, Azman Hashim International Business School, Universiti Teknologi Malaysia, Kuala Lumpur, Malaysia.
2Nor Aiza Mohd Zamil, Azman Hashim International Business School, Universiti Teknologi Malaysia, Kuala Lumpur, Malaysia.
3Rohaida Basiruddin, Azman Hashim International Business School, Universiti Teknologi Malaysia, Kuala Lumpur, Malaysia.
4Siti Zaleha Abdul Rasid, Azman Hashim International Business School, Universiti Teknologi Malaysia, Kuala Lumpur, Malaysia.
5Nor Faezah Ghazi Ahmad, Azman Hashim International Business School, Universiti Teknologi Malaysia, Kuala Lumpur, Malaysia
Manuscript received on 01 September 2019 | Revised Manuscript received on 10 September 2019 | Manuscript Published on 23 September 2019 | PP: 677-222 | Volume-8 Issue-5C, May 2019 | Retrieval Number: E10950585C19/19©BEIESP | DOI: 10.35940/ijeat.E1095.0585C19
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© The Authors. Blue Eyes Intelligence Engineering and Sciences Publication (BEIESP). This is an open access article under the CC-BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/)
Abstract: With the eminence of the era of knowledge-based economies, the concept of intellectual capital (IC) is of vital importance for organisations to survive in these vigorous environments. As one of the knowledge intensive sectors, there is no exception to banking institutions in enhancing their intellectual capital efficiency to the forefront especially for Islamic banks (IBs) that have to compete with the firmlyestablished conventional banks. Accordingly, this study intends to measure the relationship between intellectual capital efficiency and banks’ performance. In total, 59 Islamic banks are selected and their audited annual reports are compiled from the banks’ websites respectively from year 2006-2017. Value-added intellectual coefficient (VAIC) are applied in measuring IC efficiency. The findings provide empirical evidences of positive relationship between IC efficiency and banks performance, nonetheless, when decomposes into human capital efficiency (HCE), structural capital efficiency (SCE) and capital employed efficiency (CEE), only human capital efficiency shows significant positive relationship with performance of the banks while the other two components show significant negative linkage with bank performance. Furthermore, due to criticisms towards VAIC method, this study using modified value-added intellectual capital coefficient (MVAIC) and found that MVAIC has significant positive relationship with bank performance while relational capital as additional variable in MVAIC regression model has no significant effect with bank performance. This study provides better insights on the importance of utilisation of IC by banking institutions particularly for Islamic banks.
Keywords: Bank’s Performance, Intellectual Capital, Banks’ MVAIC, VAIC.
Scope of the Article: Social Sciences