Intellectual Capital and Bank Profitability: Evidence from Serbia
Research Question: This paper examines how investing in Intellectual Capital (IC) influences bank profitability measured by return on average assets and return on average equity. Motivation: IC is a source of non-physical (added) value for innovative companies in the knowledge-based economy. In fina...
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| Format: | Article |
| Language: | English |
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University of Belgrade, Faculty of Organisational Sciences
2022-10-01
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| Series: | Management |
| Online Access: | https://management.fon.bg.ac.rs/index.php/mng/article/view/437 |
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| author | Isidora Ljumović Jelena Minović Slavica Stevanović |
| author_facet | Isidora Ljumović Jelena Minović Slavica Stevanović |
| author_sort | Isidora Ljumović |
| collection | DOAJ |
| description | Research Question: This paper examines how investing in Intellectual Capital (IC) influences bank profitability measured by return on average assets and return on average equity. Motivation: IC is a source of non-physical (added) value for innovative companies in the knowledge-based economy. In finance and banking, efficient use of IC is critical since a bank's capacity to supply high-quality services is based on its investment in IC. As a result, our goal was to throw light on the components of IC and examine how they relate to the commercial bank's financial performance in Serbia. Idea: The main idea behind this paper is to assess the relationship between components of IC and bank profitability. We used the three most common components: Human Capital Efficiency (HCE), Capital Employed Efficiency (CEE), and Structural Capital Efficiency (SCE), as well as control variables such as banks' size and leverage. Data: We used a Bankscope data set that included 27 Serbian commercial banks from 2011 to 2019, with 212 observations. Tools: We used Breusch–Pagan Lagrange multiplier and the Pesaran test to examine cross-section dependence. Based on the test results, we used the system generalized method of moments (GMM) to assess the relationship between IC components and bank profitability. Findings: In Serbian banking industry, both HCE and CEE considerably impact bank profitability. However, we couldn't find evidence that SCE contributes to bank profitability. Contribution: This paper adds to the existing literature on the relationship between IC and bank profitability. However, it also includes a policy recommendation for bank executives as we discovered that investing in IC can positively influence bank profitability. |
| format | Article |
| id | doaj-art-f9aa88b7faba4051a9d245748e683753 |
| institution | Kabale University |
| issn | 1820-0222 2406-0658 |
| language | English |
| publishDate | 2022-10-01 |
| publisher | University of Belgrade, Faculty of Organisational Sciences |
| record_format | Article |
| series | Management |
| spelling | doaj-art-f9aa88b7faba4051a9d245748e6837532025-02-05T11:51:30ZengUniversity of Belgrade, Faculty of Organisational SciencesManagement1820-02222406-06582022-10-01293617210.7595/management.fon.2022.0010407Intellectual Capital and Bank Profitability: Evidence from SerbiaIsidora Ljumović0https://orcid.org/0000-0002-8603-9672Jelena Minović1https://orcid.org/0000-0001-6254-4888Slavica Stevanović2https://orcid.org/0000-0002-8545-4540Institute of Economic Sciences, Belgrade, SerbiaInstitute of Economic Sciences, Belgrade, SerbiaInstitute of Economic Sciences, Belgrade, SerbiaResearch Question: This paper examines how investing in Intellectual Capital (IC) influences bank profitability measured by return on average assets and return on average equity. Motivation: IC is a source of non-physical (added) value for innovative companies in the knowledge-based economy. In finance and banking, efficient use of IC is critical since a bank's capacity to supply high-quality services is based on its investment in IC. As a result, our goal was to throw light on the components of IC and examine how they relate to the commercial bank's financial performance in Serbia. Idea: The main idea behind this paper is to assess the relationship between components of IC and bank profitability. We used the three most common components: Human Capital Efficiency (HCE), Capital Employed Efficiency (CEE), and Structural Capital Efficiency (SCE), as well as control variables such as banks' size and leverage. Data: We used a Bankscope data set that included 27 Serbian commercial banks from 2011 to 2019, with 212 observations. Tools: We used Breusch–Pagan Lagrange multiplier and the Pesaran test to examine cross-section dependence. Based on the test results, we used the system generalized method of moments (GMM) to assess the relationship between IC components and bank profitability. Findings: In Serbian banking industry, both HCE and CEE considerably impact bank profitability. However, we couldn't find evidence that SCE contributes to bank profitability. Contribution: This paper adds to the existing literature on the relationship between IC and bank profitability. However, it also includes a policy recommendation for bank executives as we discovered that investing in IC can positively influence bank profitability.https://management.fon.bg.ac.rs/index.php/mng/article/view/437 |
| spellingShingle | Isidora Ljumović Jelena Minović Slavica Stevanović Intellectual Capital and Bank Profitability: Evidence from Serbia Management |
| title | Intellectual Capital and Bank Profitability: Evidence from Serbia |
| title_full | Intellectual Capital and Bank Profitability: Evidence from Serbia |
| title_fullStr | Intellectual Capital and Bank Profitability: Evidence from Serbia |
| title_full_unstemmed | Intellectual Capital and Bank Profitability: Evidence from Serbia |
| title_short | Intellectual Capital and Bank Profitability: Evidence from Serbia |
| title_sort | intellectual capital and bank profitability evidence from serbia |
| url | https://management.fon.bg.ac.rs/index.php/mng/article/view/437 |
| work_keys_str_mv | AT isidoraljumovic intellectualcapitalandbankprofitabilityevidencefromserbia AT jelenaminovic intellectualcapitalandbankprofitabilityevidencefromserbia AT slavicastevanovic intellectualcapitalandbankprofitabilityevidencefromserbia |