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

School of Finance and Economics, Jiangsu University, Zhenjiang 212013, China
College of Management, Shenzhen University, Shenzhen 518060, China
School of Management, Jiangsu University, Zhenjiang 212013, China
Author to whom correspondence should be addressed.
Sustainability 2019, 11(14), 3842;
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)
PDF [351 KB, uploaded 14 July 2019]


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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