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Intellectual Capital, Profitability, and Productivity: Evidence from Pakistani Financial Institutions

Author

Listed:
  • Hongxing Yao

    (School of Finance and Economics, Jiangsu University, Zhenjiang 212013, China)

  • Muhammad Haris

    (School of Finance and Economics, Jiangsu University, Zhenjiang 212013, China)

  • Gulzara Tariq

    (School of Finance and Economics, Jiangsu University, Zhenjiang 212013, China)

  • Hafiz Mustansar Javaid

    (College of Management, Shenzhen University, Shenzhen 518060, China)

  • Muhammad Aamir Shafique Khan

    (School of Management, Jiangsu University, Zhenjiang 212013, China)

Abstract

The idiosyncratic and knowledge-intense nature of the financial institutions requires them to rely more on intangible than on tangible resources. Over the past two decades, researchers have been motivated to embark on the relationship between intellectual capital (IC) and performance of financial institutions. Considering the knowledge-based intellect as a critical skill of this era, the current study examines the impact of IC on the performance of 111 Pakistani financial institutions (PFIs) over the period 2007–2018. Two IC measures, i.e., value-added intellectual coefficient (VAIC) and modified value-added intellectual coefficient (MVAIC), were applied to examine the impact of IC on profitability and productivity. Robust results from the fixed effect regression and generalized method of momentum affirm the inverted U-shaped relationship between IC and performance, suggesting that the increase in IC performance of PFIs increases their profitability and productivity up to a certain level, and after that, a further increase in IC performance decreases profitability and productivity. The results further suggest that human capital is the most influencing intellectual resource which produces higher intellectual efficiencies and increases the performance significantly. The results of this study are likely to be helpful for management, regulators, policy makers, and academics and provide insights into the importance of IC and suggest that the investment in the IC improves the sustainable performance to a certain extent.

Suggested Citation

  • Hongxing Yao & Muhammad Haris & Gulzara Tariq & Hafiz Mustansar Javaid & Muhammad Aamir Shafique Khan, 2019. "Intellectual Capital, Profitability, and Productivity: Evidence from Pakistani Financial Institutions," Sustainability, MDPI, vol. 11(14), pages 1-30, July.
    • Handle: RePEc:gam:jsusta:v:11:y:2019:i:14:p:3842-:d:248307
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    4. Muhammad Akhtar & Kong Yusheng & Muhammad Haris & Qurat Ul Ain & Hafiz Mustansar Javaid, 2022. "Impact of financial leverage on sustainable growth, market performance, and profitability," Economic Change and Restructuring, Springer, vol. 55(2), pages 737-774, May.
    5. Quan Tran & Anh‐Tuan Doan & Thao Tran, 2022. "What are the drivers of SMEs' financial performance? The interaction of intellectual capital and ownership," Australian Economic Papers, Wiley Blackwell, vol. 61(4), pages 751-777, December.
    6. Muhammad Haris & Hongxing Yao & Gulzara Tariq & Hafiz Mustansar Javaid & Qurat Ul Ain, 2019. "Corporate Governance, Political Connections, and Bank Performance," IJFS, MDPI, vol. 7(4), pages 1-37, October.
    7. Jian Xu & Muhammad Haris & Hongxing Yao, 2019. "Should Listed Banks Be Concerned with Intellectual Capital in Emerging Asian Markets? A Comparison between China and Pakistan," Sustainability, MDPI, vol. 11(23), pages 1-23, November.
    8. Tadeusz A. Grzeszczyk, 2020. "Development of human capital in institutions from the Polish financial sector: Towards new technologies and agile business models," International Entrepreneurship Review, Centre for Strategic and International Entrepreneurship at the Cracow University of Economics., vol. 6(4), pages 51-63.
    9. Camelia Oprean-Stan & Sebastian Stan & Vasile Brătian, 2020. "Corporate Sustainability and Intangible Resources Binomial: New Proposal on Intangible Resources Recognition and Evaluation," Sustainability, MDPI, vol. 12(10), pages 1-23, May.
    10. Ahmed Jinjiri Bala & Aminu Hassan & Muhammad Liman Muhammad, 2024. "Do board characteristics matter in the relationship between intellectual capital efficiency and firm value? Evidence from the Nigerian oil and gas downstream sector," Future Business Journal, Springer, vol. 10(1), pages 1-24, December.
    11. 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.
    12. Siti Zaitun Saddam & Nurhuda Nizar & Nurul Azrin Ariffin & Norazira Mohd Abas, 2023. "The Effects of Dynamic Capabilities on Firm’s Financial Performance," Information Management and Business Review, AMH International, vol. 15(1), pages 37-45.
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    14. Yuqiu Lu & Guowei Li & Zhe Luo & Muhammad Anwar & Yunju Zhang, 2021. "Does Intellectual Capital Spur Sustainable Competitive Advantage and Sustainable Growth?: A Study of Chinese and Pakistani Firms," SAGE Open, , vol. 11(1), pages 21582440219, February.

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