How Does Intellectual Capital Reduce Bank Opacity? New Empirical Exploration from an Emerging Market

[Purpose] The research aims to empirically investigate the linkage between intellectual capital (IC) and bank opacity in an emerging market. [Design/methodology/approach] The paper utilizes a sample of Vietnamese banks over the long period 2006-2020 and applies the extended value-added intellectual coefficient model rather than the conventional approach to measure IC. [Findings] The empirical evidence, with the strong support of various robust tests, demonstrates that IC-rich banks tend to be less opaque. Also, when decomposing IC into its components, the result indicates that structural capital serves as a vital factor in alleviating banks’ opaqueness. Additionally, the relational capital, human capital, and capital employed components are associated with reducing opacity in large banks, but this is not true in the case of structural capital. Meanwhile, small banks seemingly leverage structural capital more effectively; nonetheless, quickening capital employed can take its toll on their opacity. [Originality/value] This study is a pioneering empirical exploration to demystify the impact of IC on bank opacity by using the extended value-added intellectual coefficient model based on an emerging market; thus, enriching the understanding of how IC influences bank opacity and offering both theoretical contributions and actionable insights for decision-making. [Implications] The study is limited to Vietnamese banks, which may restrict the generalizability of the findings. Future research could extend the analysis to other emerging and developed markets for broader comparison. The evidence informs decision-making processes for multiple stakeholders. Bank managers can strategically invest in IC to improve transparency, regulators can design more effective disclosure and oversight policies, and investors may incorporate IC considerations into their risk assessment and valuation decisions.