Title: Intellectual capital and its effect on the financial performance of Ethiopian private commercial banks

Authors: Abdu Mohammed Assfaw

Addresses: Department of Accounting and Finance, Wolkite University, P.O. Box, 07, Ethiopia

Abstract: This study aims to examine the intellectual capital and its effect on the financial performance of Ethiopian private commercial banks using the pulic model. Quantitative panel data from audited annual reports of Ethiopian private commercial banks from 2011 to 2019 are collected. The robust fixed effect regression model has been adopted to investigate the effect of IC and the financial performance measures of the banks. The study results show a positive relationship between the value added intellectual coefficient (VAIC) and the financial performance of private commercial banks in Ethiopia. The study also revealed that the components of VAIC (i.e., human capital efficiency, capital employed efficiency, and structural capital efficiency) have a positive and significant effect on the financial performance of banks measured by return on asset and return on equity over the study periods. Practically, the results of the study could be useful for shareholders to consider IC as a strategic resource and hence emphasise these intangibles, and to the bank managers to benchmark themselves against the best competitors based on the level of efficiency rankings.

Keywords: robust fixed effect regression; intellectual capital; VAIC; financial performance; commercial banks; Ethiopia.

DOI: 10.1504/IJBIR.2024.142309

International Journal of Business Innovation and Research, 2024 Vol.35 No.3, pp.429 - 456

Received: 17 Sep 2021
Accepted: 08 Dec 2021
Published online: 21 Oct 2024 *

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