Should bankers be concerned with Intellectual capital? A study of the Thai banking sector

• Published in: Journal of intellectual capital Vol. 19; no. 5; pp. 897 - 914
• Main Authors: Tran, Dai Binh, Vo, Duc Hong
• Format: Journal Article
• Language: English
• Published: Bradford Emerald Publishing Limited 31-08-2018; Emerald Group Publishing Limited
• Subjects: Accounting; Banking; Banking industry; Banks; Competitive advantage; Economic crisis; Economic models; Efficiency; Financial performance; Financial services; Generalized method of moments; Human capital; Intellectual capital; Knowledge; Method of moments; Profitability; Public sector; R&D; Research & development; Return on assets; Value creation; Thailand; Intellectual capital; Banking sector; Financial performance; Thailand; VAIC
• ISSN: 1469-1930; 1758-7468
• DOI: 10.1108/JIC-12-2017-0185

Purpose
The purpose of this paper is to examine the causal effect of intellectual capital (IC) performance on financial performance at Thai listed banks.
Design/methodology/approach
Data are collected from 16 listed banks in Thailand for the period 1997–2016. This paper uses the value-added intellectual coefficient methodology suggested by Pulic (1998, 2004) to measure IC. This study employs a fixed-effects and random-effects model and generalized method of moments (GMM) estimator to investigate the causal effect of IC on financial performance.
Findings
The results show that bank profitability is driven mainly by capital employed efficiency to make a profit. However, human capital efficiency marginally reduces bank profitability in the current period but has positive effects on future profitability.
Research limitations/implications
First, this study does not cover data on foreign banks, which reduces the generalizability of the results. Second, financial statements can be manipulated through accounting adjustments. Lastly, subsequent research should control for more bank characteristics, such as bank ownership, the non-performing loan ratio and R&D expenditure.
Practical implications
To achieve higher future profitability, banks should not only manage their physical and financial capital effectively but also improve employee efficiency.
Originality/value
This paper contributes to the literature on IC in the banking sector in emerging countries. Moreover, this paper is the first to employ the GMM method in the banking context to address possible endogeneity problems.