Abstract
The purpose of this paper is to investigate the impact of Value Added Intellectual
Coefficient (VAIC) and its components such as Human Capital Efficiency (HCE),
Structural Capital Efficiency (SCE) and Capital Employed Efficiency (CEE) on the
financial performance of conventional and Islamic commercial banks in Pakistan. For
estimations, the data was collected from Financial Statement Analysis (FSA) of Financial
Firms assembled by the State Bank of Pakistan (SBP) during 2007-2016. Pooled
Ordinary Least Squares (OLS) method was used to estimate the impact of VAIC and its
components on performance of 6 Islamic and 22 conventional commercial banks in
Pakistan. Results show that VAIC and its components (i.e. HCE, SCE and CEE) have a
significant, positive impact on all performance measures (i.e. ROA, ROE and EPS) of
conventional banks. CEE is the only component of VAIC that significant and positively
impacts the performance of Islamic banks. Descriptive statistics show that the mean
value of HCE is higher for conventional banks than for Islamic banks. No big difference
is observed between the mean values of SCE and CEE in both types of banks. However,
mean value of intellectual capital efficiency (ICE) was higher for conventional banks due
to the greater mean value of HCE, than for Islamic banks. In sum, VAIC has substantial
effect on the performance of conventional banks. This might be due to the reasons that
conventional banks are operating in Pakistan since independence, and have a strong
deposits-base due to nationwide branch network than Islamic banks, which are at the
infancy stage
Nadeem Ahmed Sheik, Khawaja Khalid Mehmood, Muhammad Shahzad Rasool. (2019) Impact of Value Added Intellectual Coefficient on Bank Performance: Evidence from Conventional and Islamic Banks in Pakistan, NUML International Journal of Business & Management, Volume 14, Issue 1.
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