THE INFLUENCE OF INTELLECTUAL CAPITAL ON FINANCIAL PERFORMANCE: EVIDENCE FROM LICENSED SPECIALIZED BANKS IN SRI LANKA
Kanishka, W. L.
Department of Banking and Finance, Faculty of Business Studies and Finance, Wayamba University of Sri Lanka
kanishkawithanage229@gmail.com
ABSTRACT
DOI : 10.57075/jaf1112406
As the knowledge-based economy developed, businesses transformed their emphasis from physical to intellectual capital. Numerous studies have looked into how intellectual capital affects a company’s value. The study’s goal is to investigate, from 2010 to 2022, the connection between five licensed specialized banks’ financial performance and their intellectual capital. The statements of comprehensive income and financial position for the pertinent years were the main sources of the data that were collected from the banks’ annual reports available on their individual websites. The study’s results were analysed and secondary quantitative data screened using EViews version 9 statistical software. The value-added intellectual coefficient method was used to measure the banks’ performance based on their intellectual capital. The return on equity and return on assets are two indicators of the bank’s performance. The value of intellectual capital was analyzed in three categories: structural, intellectual, and physical. Both simple and multiple regression techniques were used to assess the effect of intellectual capital on equity and assets. The study found a significant correlation between the value-added intellectual coefficient, its components, and financial performance. In both multiple regression models, the structural capital efficiency was statistically insignificant but positively correlated. Both multiple regression models showed statistical insignificance and negative correlation for the capital employed efficiency. Human capital efficiency was statistically significant and positively correlated in both multiple regression models. The most crucial value-added intellectual coefficient factor for generating value in Sri Lankan specialty banks operating in the banking industry is human capital efficiency. Additionally, this study will give stakeholders and possible investors some information to evaluate the value-creating potential of particular banks. The findings of the study help to increase decision-makers’ understanding of the importance of intellectual capital as a crucial element that can enhance a business’s ability to maintain its competitive position. This study is the first to examine the impact of intellectual capital on the financial performance of Sri Lankan licensed specialized banks through 2023. The study emphasizes how critical it is to investigate the relationship between intellectual capital and the banking industry’s financial performance in greater detail.
Keywords: Intellectual Capital, Human Capital, Structured Capital, Capital Employed, Relational Capital, Financial Performance
