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Impact of Intellectual Capital on Financial Performance: Panel Evidence from Banking Industry in Indonesia

Author

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  • Ummu Salma Al-Azizah
  • Bagus Pamungkas Wibowo

Abstract

This research investigates the impact of intellectual capital (IC) on the financial performance of Indonesian bank enterprises. Data were collected from 42 Indonesian banks between 2017 and 2021. IC was measured using descriptive statistics, correlation coefficients, and panel data regression techniques, as well as the Value Added Intellectual Coefficient (VAIC) component through Human Capital Efficiency (HCE), Capital Employed Efficiency (CEE), and Structural Capital Efficiency (SCE), and their impact on financial performance through Return on Assets (ROA), Return on equity (ROE), and Asset Turnover (ATO). The analysis was conducted with secondary data extracted from the firms’ annual reports. The results show the impact of the VAIC model and the VAIC component on financial performance. The VAIC model significantly affects financial performance, namely ROA, ROE, and ATO. The VAIC component does not significantly affect financial performance results, although SCE significantly affects financial performance as measured by ATO. This research expands the knowledge and evaluates financial performance and the creation of corporate bank value. It can be used across industries, and the findings have implications for the banking industry in the context of competitive advantage and for company managers. This study presents empirical evidence and broadens our understanding of the use of IC to enhance the financial performance of Indonesian banking firms.

Suggested Citation

  • Ummu Salma Al-Azizah & Bagus Pamungkas Wibowo, 2023. "Impact of Intellectual Capital on Financial Performance: Panel Evidence from Banking Industry in Indonesia," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 5, pages 51-65.
    • Handle: RePEc:bas:econst:y:2023:i:5:p:51-65
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital

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