Intellectual capital performance of commercial banks in Malaysia
| Pages | 385-396 |
| DOI | https://doi.org/10.1108/14691930510611120 |
| Date | 01 September 2005 |
| Published date | 01 September 2005 |
| Author | Pek Chen Goh |
| Subject Matter | Accounting & finance,HR & organizational behaviour,Information & knowledge management |
Intellectual capital performance
of commercial banks in Malaysia
Pek Chen Goh
Multimedia University, Melaka, Malaysia
Abstract
Purpose – This papermeasured the intellectual capital performance of commercial banks inMalaysia
for the period 2001 to 2003, using efficiency coefficient called VAICedeveloped by Ante Pulic.
Design/methodology/approach – Data required to calculate human capital, structural capital and
capital employed efficiencies were obtained from annual reports.
Findings – As a whole, all banks have relatively higher human capital efficiency than structural and
capital efficiencies. Domestic banks were generally less efficient compared to foreign banks. Hong
Leong Bank, Public Bank and Southern Bank were the top three efficient domestic banks based on
VAIC
TM
assessment, while Scotia Bank is the most efficient foreign bank. Public Bank and EON Bank
have consistently showed improvement in efficiency in the three years. There were significant
differences between rankings of bank according to efficiency and traditional accounting measures. In
view of the findings that seven out of ten domestic banks did not show improvement in efficiency
following the consolidation exercise requires an urgent attention and remedial actions.
Research limitations/implications – This study failed to study all foreign banks operating in
Malaysia. Future study should therefore further improve on the aspect of coverage.
Practical implications – The findings allowed banks to benchmark themselves based on the level
of efficiency rankings, to establish priorities and develop strategic plans, which will in turn enhance
their future performance. The findings also could help stakeholders and investors assess the value
creating potential of banks; and policy makers to formulate and implement policies for establishment
of a resilient banking sector.
Originality/value – This study is the first study on Malaysian banks’intellectual capital performance.
Keywords Intellectualcapital, Performance management, Banks,Malaysia
Paper type Research paper
Introduction
The Malaysian economy has recorded an average 7 per cent growth over the last three
decades (Bank Negara Malaysia, 2001). This strong growth was generated by massive
inflows of foreign direct investment (FDI) since the 1970s. Most of these FDI are in the
manufacturing sector that depends heavily on labor. However, due to increasing labor cost,
Malaysia could lose its competitiveness if it continues to depend solely on the production
of labor-intensive goods and eventually, this would affect future economic growth.
Recognizing the urgency of promoting sustainable economic growth, Malaysia
began to promote the development of knowledge-driven economy in the early 2000s.
The Knowledge Economy Master Plan, published in 2001, consists of strategies to
transform Malaysia from an input-driven to a knowledge-driven economy. Similar
moves have been taken by other countries, namely Europe (ERT, 2001), New Zealand
(New Zealand Ministry of Economic Development, 1999), UK (UK Ministry of Trade
and Industry, 1998) and Scotland (The Scottish Office, 1999). Undoubtedly, these
countries are looking for strategies to reposition themselves in the emerging
knowledge-driven economy.
The Emerald Research Register for this journal is available at The current issue and full text archive of this journal is available at
www.emeraldinsight.com/researchregister www.emeraldinsight.com/1469-1930.htm
Intellectual
capital
performance
385
Journal of Intellectual Capital
Vol. 6 No. 3, 2005
pp. 385-396
qEmerald Group Publishing Limited
1469-1930
DOI 10.1108/14691930510611120
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