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

1
School of Finance and Economics, Jiangsu University, Zhenjiang 212013, China
2
College of Management, Shenzhen University, Shenzhen 518060, China
3
School of Management, Jiangsu University, Zhenjiang 212013, China
*
Author to whom correspondence should be addressed.
Sustainability 2019, 11(14), 3842; https://doi.org/10.3390/su11143842
Received: 8 June 2019 / Revised: 9 July 2019 / Accepted: 10 July 2019 / Published: 14 July 2019
(This article belongs to the Section Economic, Business and Management Aspects of Sustainability)
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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. View Full-Text
Keywords: intellectual capital; profitability; productivity; financial institutions; Pakistan intellectual capital; profitability; productivity; financial institutions; Pakistan
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited (CC BY 4.0).
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Yao, H.; Haris, M.; Tariq, G.; Javaid, H.M.; Khan, M.A.S. Intellectual Capital, Profitability, and Productivity: Evidence from Pakistani Financial Institutions. Sustainability 2019, 11, 3842.

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