A study of determinants of intellectual capital performance in banks: the UK case

Pages487-498
DOIhttps://doi.org/10.1108/14691930810892045
Published date25 July 2008
Date25 July 2008
AuthorMagdi El‐Bannany
Subject MatterAccounting & finance,HR & organizational behaviour,Information & knowledge management
A study of determinants of
intellectual capital performance
in banks: the UK case
Magdi El-Bannany
Liverpool Business School, Liverpool, UK
Abstract
Purpose The purpose of this paper is to investigate the determinants of intellectual capital
performance in the UK banks over the period 1999-2005.
Design/methodology/approach – Multiple regression analysis is used to test the relationship
between the intellectual capital performance as a dependent variable and certain independent
variables.
Findings Results indicate that the standard variables, bank profitability and bank risk, are
important. The results also show that investment in information technology (IT) systems, bank
efficiency, barriers to entry and efficiency of investment in intellectual capital variables, which have
not been considered in previous studies, have a significant impact on intellectual capital performance.
Research limitations/implications – More evidence is needed on the determinants of intellectual
capital performance before any generalisation of the results can be made. In addition, the empirical tests
were conducted only on the Major British Banks Group over the period 1999-2005 and hence the results
of the study cannot be assumed to extend beyond this group of banks or to different study periods.
Practical implications – The study might help the banking regulators in addressing the factors
affecting intellectual capital performance to take actions towards developing their performance and in
turn maximise their value creation.
Originality/value – This paper adds to the literature on the determinants of intellectual capital
performance in banks. In particular, it tests the theories that investment in IT systems, bank efficiency,
barriers to entry and efficiency of investment in intellectual capital have impact on intellectual capital
performance.
Keywords Intellectualcapital, Human capital, Systems analysis,Banks, United Kingdom
Paper type Research paper
Introduction
Human capital, as an intellectual capital component, is one of the most important
resources which companies rely on to improve their efficacy and efficiency, and hence
gain a competitive advantage as argued by de Pablos (2003).
Nielsen et al. (2006) argued that human capital, represented by the company’s stock
of, e.g. skilled employees, knowledge and management philosophy, helps to improve
the company’s performance. This makes studying the determinants of intellectual
capital performance a key challenge.
In addition, the results of this study might help the banking authorities to formulate
and implement strategies to develop intellectual capital and guide banks to benchmark
themselves in order to improve their value creation as argued by Goh (2005).
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1469-1930.htm
The author is grateful to Professor Ken Holden of Lancaster University in the UK for his helpful
and valuable comments on earlier drafts of this paper.
Intellectual
capital
performance
487
Journal of Intellectual Capital
Vol. 9 No. 3, 2008
pp. 487-498
qEmerald Group Publishing Limited
1469-1930
DOI 10.1108/14691930810892045

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