Does Intellectual Capital Promote Bank’s Performance? Evidence from Commercial Banks in Pakistan
The objective of this study is to assess the possible effects of Intellectual Capital (IC) on the performance of banking sector in Pakistan. The study took up a sample of 13 listed commercial banks and constructed an annual panel data for the year 2010 to 2019. To measure intellectual capital, Value Added Intellectual Coefficient, (VAIC) proposed by Pulic, (1998, 2001) has been used. Fixed Effect model is used to perform the empirical analysis. The findings of the study confirm the role of IC in increasing banking sector performance of Pakistan. On the other hand, studying the effects of individual facets of IC, it was found that human capital efficiency (HCE) and Capital Employed Efficiency (CEE) significantly improve the banking performance. However, the Structural Capital efficiency (SCE) was not found improving Pakistan’s banking sector performance. The paper provides policy recommendations for increasing the performance of banking sector pertaining to Pakistan in particular and to other developing countries in general.