| Title : | Intellectual capital and the financial performance of commercial banks in Nepal | | Material Type: | printed text | | Authors: | Roshan Budhathoki, Author | | Publication Date: | 2016 | | Pagination: | 122p. | | Size: | GRP/Thesis | | Accompanying material: | 7/B | | Languages : | English | | Descriptors: | Intellectual capital
| | Class number: | 658.4063 | | Abstract: | The banking industry has had noticeable changes in its business environment due to the financial liberalization and consolidation, economic transformation and more discerning customers. Thus, commercial banks have to allocate resources effectively and perform their operations efficiently to gain the competitive advantage. The value of financial and operational performance resulting from increased investment in intellectual capital is the relationship that needs to be established with the aim of addressing the challenges faced by the commercial banks in Nepal. The use of intellectual capital should become one of the priorities of all organizations because it can improve the financial performance of organizations, create value, and provide sustainable environment for competitive advantage (Cohen and Kaimenakis, 2007). Every organization has valuable intellectual capital, and leveraging it is strategically important to gain a competitive advantage (Vergauwen et al., 2009).
The major purpose of this study is to examine the impact of intellectual capital on financial performance of Nepalese commercial banks. The specific objectives of the study are: (a) to measure and evaluate the value added intellectual coefficient, human capital efficiency, structural capital efficiency, and capital employed efficiency of commercial banks, (b) to identify and examine the relationship between intellectual capital components and the profitability of commercial banks, (c) to analyze the relationship between control variables such as financial leverage and firm size and the financial performance of commercial banks, (d) to determine the overall rank of selected commercial banks on the basis of average value added intellectual coefficient score.
This study is based on descriptive and causal-comparative research designs. The descriptive research design has been adopted to undertake fact-finding operation searching for adequate information about the impact of intellectual capital components and other variables on the financial performance of Nepalese commercial banks. This study is based on the cross sectional secondary data which are gathered from 24 commercial banks in Nepal. The total numbers of observations is 160. The main sources of data are supervision reports of Nepal Rastra Bank and various annual reports of different commercial banks. The data are collected for value added intellectual coefficient, human capital efficiency, structural capital efficiency, capital employed efficiency, firm size, financial leverage, return on assets, return on equity, return on investment, and earnings per share. These data are collected for the period 2007/08- 2013/14.
The result shows that there is positive and significant relationship of return on assets with value added intellectual coefficient, human capital efficiency, structural capital efficiency, capital employed efficiency, and financial leverage. Similarly, the result states that there is negative relationship between firm size and return on assets. The result also reveals that return on equity and return on investment are positively and significantly related to value added intellectual coefficient, human capital efficiency, structural capital efficiency, and capital employed efficiency. Likewise, there is negative relationship of firm size and financial leverage with return on equity and return on investment. Similarly, the study shows that there is positive and significant relationship of earnings per share with value added intellectual coefficient, human capital efficiency, capital employed efficiency, firm size, and financial leverage. However, the result shows that structural capital efficiency and earnings per share are negatively related to each other.
The major conclusion of this study is that intellectual capital has a positive relationship with financial performance measures in Nepalese commercial banks. The study concludes that among the intellectual capital components, capital employed efficiency is the most dominant variable that affects the performance of the banks. The banks have given more importance to human capital over structural capital. The banking sector is a service sector where its customer services rely heavily on human capital. It seems that banks have given priority to investment in human capital to gain competitive advantage and continue to survive in the industry.
This study also concludes that banks are not utilizing enough structural capital to create value. The banking sector has still not realized the importance and need of intellectual capital and hence continues to rely on physical or tangible assets. Likewise, structural capital efficiency has a negative impact on earnings per share. The result can be attributed to inefficient banking system or imperfect functioning of the capital market in Nepal. Similarly, larger banks have high share price. In the same way, banks use debts to finance their total assets that have positive effect on earnings per share.
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Intellectual capital and the financial performance of commercial banks in Nepal [printed text] / Roshan Budhathoki, Author . - 2016 . - 122p. ; GRP/Thesis + 7/B. Languages : English | Descriptors: | Intellectual capital
| | Class number: | 658.4063 | | Abstract: | The banking industry has had noticeable changes in its business environment due to the financial liberalization and consolidation, economic transformation and more discerning customers. Thus, commercial banks have to allocate resources effectively and perform their operations efficiently to gain the competitive advantage. The value of financial and operational performance resulting from increased investment in intellectual capital is the relationship that needs to be established with the aim of addressing the challenges faced by the commercial banks in Nepal. The use of intellectual capital should become one of the priorities of all organizations because it can improve the financial performance of organizations, create value, and provide sustainable environment for competitive advantage (Cohen and Kaimenakis, 2007). Every organization has valuable intellectual capital, and leveraging it is strategically important to gain a competitive advantage (Vergauwen et al., 2009).
The major purpose of this study is to examine the impact of intellectual capital on financial performance of Nepalese commercial banks. The specific objectives of the study are: (a) to measure and evaluate the value added intellectual coefficient, human capital efficiency, structural capital efficiency, and capital employed efficiency of commercial banks, (b) to identify and examine the relationship between intellectual capital components and the profitability of commercial banks, (c) to analyze the relationship between control variables such as financial leverage and firm size and the financial performance of commercial banks, (d) to determine the overall rank of selected commercial banks on the basis of average value added intellectual coefficient score.
This study is based on descriptive and causal-comparative research designs. The descriptive research design has been adopted to undertake fact-finding operation searching for adequate information about the impact of intellectual capital components and other variables on the financial performance of Nepalese commercial banks. This study is based on the cross sectional secondary data which are gathered from 24 commercial banks in Nepal. The total numbers of observations is 160. The main sources of data are supervision reports of Nepal Rastra Bank and various annual reports of different commercial banks. The data are collected for value added intellectual coefficient, human capital efficiency, structural capital efficiency, capital employed efficiency, firm size, financial leverage, return on assets, return on equity, return on investment, and earnings per share. These data are collected for the period 2007/08- 2013/14.
The result shows that there is positive and significant relationship of return on assets with value added intellectual coefficient, human capital efficiency, structural capital efficiency, capital employed efficiency, and financial leverage. Similarly, the result states that there is negative relationship between firm size and return on assets. The result also reveals that return on equity and return on investment are positively and significantly related to value added intellectual coefficient, human capital efficiency, structural capital efficiency, and capital employed efficiency. Likewise, there is negative relationship of firm size and financial leverage with return on equity and return on investment. Similarly, the study shows that there is positive and significant relationship of earnings per share with value added intellectual coefficient, human capital efficiency, capital employed efficiency, firm size, and financial leverage. However, the result shows that structural capital efficiency and earnings per share are negatively related to each other.
The major conclusion of this study is that intellectual capital has a positive relationship with financial performance measures in Nepalese commercial banks. The study concludes that among the intellectual capital components, capital employed efficiency is the most dominant variable that affects the performance of the banks. The banks have given more importance to human capital over structural capital. The banking sector is a service sector where its customer services rely heavily on human capital. It seems that banks have given priority to investment in human capital to gain competitive advantage and continue to survive in the industry.
This study also concludes that banks are not utilizing enough structural capital to create value. The banking sector has still not realized the importance and need of intellectual capital and hence continues to rely on physical or tangible assets. Likewise, structural capital efficiency has a negative impact on earnings per share. The result can be attributed to inefficient banking system or imperfect functioning of the capital market in Nepal. Similarly, larger banks have high share price. In the same way, banks use debts to finance their total assets that have positive effect on earnings per share.
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