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Investigating the Impact of Intellectual Capital on the Sustainable Financial Performance of Private Sector Banks in India

Author

Listed:
  • Monika Barak

    (Thapar Institute of Engineering and Technology, Patiala 147004, Punjab, India)

  • Rakesh Kumar Sharma

    (Thapar Institute of Engineering and Technology, Patiala 147004, Punjab, India)

Abstract

The study aims to investigate the impact of intellectual capital (I.C) on the sustainable financial performance (F.P) of private sector banks (PSBs) in India. Data were gathered from 17 banks between 2010 and 2021 using Prowessiq (CMIE) and their annual financial reports. To evaluate the ways in which intellectual capital (I.C) affects sustainable financial performance (F.P), the modified value-added intellectual coefficient (MVAIC) methodology was applied. The human capital (HC), capital employed (CE), structural capital (SC), and relational capital (RC) were utilized as independent factors together with three control variables (leverage, size, and GDP), the return on capital employed (ROCE), and return on equity (ROE), which were used as dependent variables. The results show that RC and SC have a clear, statistically significant relationship with ROCE. Additionally, HC and CE have a direct positive and statistically significant effect on ROE. Overall, all of the I.C. components have significant impacts in increasing the efficiency and profitability of Indian private sector banks. Furthermore, the total intellectual capital (MVAIC) exhibits a statistically significant negative association with ROE but a substantial positive association with ROCE. It is advised that policymakers and managers focus more on the various I.C components because they are the key engines generating value for the banks in order to preserve a more sustainable F.P.

Suggested Citation

  • Monika Barak & Rakesh Kumar Sharma, 2023. "Investigating the Impact of Intellectual Capital on the Sustainable Financial Performance of Private Sector Banks in India," Sustainability, MDPI, vol. 15(2), pages 1-21, January.
    • Handle: RePEc:gam:jsusta:v:15:y:2023:i:2:p:1451-:d:1033327
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    References listed on IDEAS

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    3. Prince Yeboah Boateng & Francis Aboagye-Otchere & Nicholas Asare, 2025. "Intellectual capital and financial performance: linear and non-linear evidence from commercial state interest entities," SN Business & Economics, Springer, vol. 5(8), pages 1-40, August.
    4. Alžbeta Kucharčíková & Martin Mičiak & Emese Tokarčíková & Nikola Štaffenová, 2023. "The Investments in Human Capital within the Human Capital Management and the Impact on the Enterprise’s Performance," Sustainability, MDPI, vol. 15(6), pages 1-21, March.
    5. Md. Sohel Rana & Syed Zabid Hossain, 2023. "Intellectual Capital, Firm Performance, and Sustainable Growth: A Study on DSE-Listed Nonfinancial Companies in Bangladesh," Sustainability, MDPI, vol. 15(9), pages 1-23, April.

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