The Effect of Intellectual Capital on Banks’ Profitability: A Study of Banks Listed on the Ghana Stock Exchange

Abstract

The study aims to examine the effect of intellectual capital on the profitability of banks listed on the Ghana Stock Exchange. Secondary data of all the listed nine banks on the Ghana Stock Exchange for the period 2011 to 2015 were utilized for the analysis. The value-added intellectual capital (VAIC) and the panel data regression techniques were employed for the data analysis. The empirical findings obtained provide evidence of a positive and significant relationship between intellectual capital and firm performance measured using return on assets (ROA). Further analysis performed by decomposing intellectual capital into its parts reveals a significant and positive relationship between structural capital efficiency (SCE) and firm performance while a negative and significant relationship between capital employed efficiency (CEE) and firm performance was recorded. The findings further show that human capital efficiency (HCE) has a positive and significant impact on firm performance. The findings underscore the urgent need for banks in Ghana and cognate regions across Sub-Saharan Africa to invest more in improving their intellectual capital for increased profitability and competitiveness.

Keywords: Intellectual capital, banking sector, Ghana stock exchange, return on assets, bank performance