Intellectual capital and firm performance of Jordanian financial institutions
-
Author(s)Dalia Ibrahim MustafaLink to ORCID Index: https://orcid.org/0000-0001-7795-5081
,
Rami Mohammad AlzebdiehLink to ORCID Index: https://orcid.org/0000-0003-0460-7099
,
Modar AbdullatifLink to ORCID Index: https://orcid.org/0000-0001-6401-205X
,
Safa’ Akef Al Majali
-
DOIhttp://dx.doi.org/10.21511/bbs.19(3).2024.02
-
Article InfoVolume 19 2024, Issue #3, pp. 9-22
- 273 Views
-
82 Downloads
This work is licensed under a
Creative Commons Attribution 4.0 International License
This study aims to explore the financial implications of intellectual capital in the Jordanian financial sector during the period 2009–2018. It uses Pulic’s (2004) value-added intellectual capital model, particularly capital employed efficiency, structural capital efficiency, and human capital efficiency, and tests its potential effect on firm financial performance measures, including return on assets, return on equity, asset utilization ratio, and Tobin’s Q. The study’s findings demonstrate that value-added intellectual capital positively influences the financial performance of Jordanian financial companies. Value-added intellectual capital is not found to have a significant impact on productivity, but it is strongly and positively related to firm profitability and market value. As for the main components of value-added intellectual capital, human capital efficiency has a significantly positive impact on a company’s performance, but regarding structural capital efficiency, the outcomes vary depending on the measure of firm performance. Notably, when firms are categorized into sub-industries (banks, insurance companies, and financial service companies), it is found that the profitability of insurance companies is more affected by intellectual capital than that of banks or financial services. The results also show that investors place great importance on the efficiency of intellectual capital, particularly within the banking industry. Furthermore, implementing Shariah compliance standards boosts the positive effect of structural capital efficiency on corporate market value and reinforces the positive influence of human capital efficiency on productivity.
- Keywords
-
JEL Classification (Paper profile tab)O34, G21, G23
-
References47
-
Tables8
-
Figures0
-
- Table 1. Sample distribution
- Table 2. Operationalization variables
- Table 3. Descriptive statistics of the variables
- Table 4. Correlation matrix
- Table A1. The impact of intellectual capital and components on firm performance
- Table A2. Industry-based regression for the impact of intellectual capital on firm performance
- Table A3. Industry-based regression for the impact of intellectual capital components on firm performance
- Table A4. Moderating role of Shariah compliance on intellectual capital and firm performance
-
- Al-Musali, M. A., & Ku Ismail, N. I. (2016). Cross-country comparison of intellectual capital performance and its impact on financial performance of commercial banks in GCC countries. International Journal of Islamic and Middle Eastern Finance and Management, 9(4), 512-531.
- Ashton, R. H. (2005). Intellectual capital and value creation: A review. Journal of Accounting Literature, 24, 53-134.
- Castro, J. P. G., Ramírez, D. F. D., & Escobar, J. M. (2021). The relationship between intellectual capital and financial performance in Colombian listed banking entities. Asia Pacific Management Review, 26(4), 237-247.
- Chan, K. H. (2009). Impact of intellectual capital on organisational performance: an empirical study of companies in the Hang Seng index (part 2). Learning Organization, 16(1), 22-39.
- Chu, S. K. W., Chan, K. H., & Wu, W. W. (2011). Charting intellectual capital performance of the gateway to China. Journal of Intellectual Capital, 12(2), 249-276.
- Clarke, M., Seng, D., & Whiting, R. H. (2011). Intellectual capital and firm performance in Australia. Journal of Intellectual Capital, 12(4), 505-530.
- Dalwai, T., & Mohammadi, S. S. (2020). Intellectual capital and corporate governance: an evaluation of Oman’s financial sector companies. Journal of Intellectual Capital, 21(6), 1125-1152.
- Firer, S., & Williams, S. M. (2003). Intellectual capital and traditional measures of corporate performance. Journal of Intellectual Capital, 4(3), 348-360.
- Gow, I. D., Ormazabal, G., & Taylor, D. J. (2010). Correcting for cross-sectional and time-series dependence in accounting research. The accounting Review, 85(2), 483-512.
- Hamdan, A. (2018). Intellectual capital and firm performance: Differentiating between accounting-based and market-based performance International Journal of Islamic and Middle Eastern Finance and Management, 11(1), 139-151.
- Haris, M., Yao, H., Tariq, G., Malik, A., & Javaid, H. M. (2019). Intellectual capital performance and profitability of banks: Evidence from Pakistan. Journal of Risk and Financial Management, 12(2), 56.
- Ho, C. A., & Williams, S. M. (2003). International comparative analysis of the association between board structure and the efficiency of value added by a firm from its physical capital and intellectual capital resources. The International Journal of Accounting, 38(4), 465-491.
- Hsu, L., & Wang, C. (2010). Clarifying the effect of intellectual capital on performance: the mediating role of dynamic capability. British Journal of Management, 23(2), 179-205.
- Isola, W. A., Adeleye, N. B., & Olohunlana, A. O. (2020). Boardroom female participation, intellectual capital efficiency and firm performance in developing countries: evidence from Nigeria. Journal of Economics, Finance and Administrative Science, 25(50), 1-20.
- Itami, H. (1987). Mobilizing Invisible Assets. Cambridge, MA: Harvard University Press.
- Javaherizadeh, E. (2021). An empirical study on the impact of female leaders and intellectual capital on the financial performance of FTSE 350 companies (Doctoral Thesis). University of West London.
- Joshi, M., Cahill, D., Sidhu, J., & Kansal, M. (2013). Intellectual capital and financial performance: an evaluation of the Australian financial sector. Journal of Intellectual Capital, 14(2), 264-285.
- Karacan, S., & Ergin, E. (2011). Intellectual capital and financial performance in the banking sector. Business and Economics Research Journal, 2(4), 1-73.
- Kaupelytė, D., & Kairytė, D. (2016). Intellectual Capital Efficiency Impact on European Small and Large Listed Banks Financial Performance. International journal of Management, Accounting and Economics, 3(6), 367-377.
- Ku Ismail, K. N. I., & Abdul Karem, M. (2011). Intellectual capital and the financial performance of banks in Bahrain. Journal of Business Management and Accounting, 1(1), 63-77.
- Mondal, A., & Ghosh, S. K. (2012). Intellectual capital and financial performance of Indian banks. Journal of Intellectual Capital, 13(4), 515-530.
- Nadeem, M., Gan, C., & Nguyen, C. (2017). Does intellectual capital efficiency improve firm performance in BRICS economies? A dynamic panel estimation. Measuring Business Excellence, 21(1), 65-85.
- Nawaz, T. (2019). Exploring the nexus between human capital, corporate governance and performance: Evidence from Islamic banks. Journal of Business Ethics, 157(2), 567-587.
- Nawaz, T., & Haniffa, R. (2017). Determinants of financial performance of Islamic banks: an intellectual capital perspective. Journal of Islamic Accounting and Business Research, 8(2), 130-142.
- Nawaz, T., & Ohlrogge, O. (2022). Clarifying the impact of corporate governance and intellectual capital on financial performance: A longitudinal study of Deutsche Bank (1957–2019). International Journal of Finance and Economics, 28(4), 3808-3823.
- Nawaz, T., Haniffa, R., & Hudaib, M. (2021). On intellectual capital efficiency and shariah governance in Islamic banking business model. International Journal of Finance & Economics, 26(3), 3770-3787.
- Nazir, M. I., Tan, Y., & Nazir, M. R. (2020). Intellectual capital performance in the financial sector: Evidence from China, Hong Kong, and Taiwan. International Journal of Finance and Economics, 26(4), 6089-6109.
- Nimtrakoon, S. (2015). The relationship between intellectual capital, firms’ market value and financial performance: empirical evidence from the ASEAN. Journal of Intellectual Capital, 16(3), 587-618.
- Nizar, N. S. (2021). Islamic Intellectual Capital and Takaful Financial Performance (Doctoral Thesis). UNS, Sebelas Maret University.
- Olohunlana, A. O., Odeleye, A. T., & Isola, W. A. (2022). Determinants of the intellectual capital efficiency of listed banks in Nigeria: a DEA approach. Journal of Business and Socio-economic Development, 3(1), 86-96.
- Ozkan, N., Cakan, S., & Kayacan, M. (2017). Intellectual capital and financial performance: A study of the Turkish Banking Sector. Borsa Istanbul Review, 17(3), 190-198.
- Petty, R., & Cuganesan, S. (2005). Voluntary disclosure of intellectual capital by Hong Kong companies: examining size, industry and growth effects over time. Australian Accounting Review, 15(36), 40-50.
- Pulic, A. (2000). VAIC™ – an accounting tool for IC management. International Journal of Technology Management, 20(5-8), 702-714.
- Pulic, A. (2004). Intellectual capital-does it create or destroy value? Measuring Business Excellence, 8(1), 62-68.
- Sardo, F., & Serrasqueiro, Z. (2017). A European empirical study of the relationship between firms’ intellectual capital, financial performance and market value. Journal of Intellectual Capital, 18(4), 771-788.
- Smriti, N., & Das, N., (2018) The impact of intellectual capital on firm performance: a study of Indian firms listed in COSPI. Journal of Intellectual Capital, 19(5), 935-964.
- Suryani, A. W., & Nadhiroh, A. (2020). Intellectual capital and capital structure effect on firms’ financial performances. Journal of Accounting Research, Organization and Economics, 3(2), 127-138.
- Tan, H., Plowman, D., & Hancock, P. (2008). The evolving research on intellectual capital. Journal of Intellectual Capital, 9(4), 585-608.
- Teece, D. J. (2000). Managing intellectual capital: Organizational, strategic, and policy dimensions. OUP Oxford.
- Ting, I. W. K., & Lean, H. H. (2009). Intellectual capital performance of financial institutions in Malaysia. Journal of Intellectual Capital, 10(4), 588-599.
- Tran, N. P., & Vo, D. H. (2020). Human capital efficiency and firm performance across sectors in an emerging market. Cogent Business & Management, 7(1), 1738832.
- Uslu, H. (2020). The role of intellectual capital in financial development: evidence from the banking sector of Turkey. Competitiveness Review, 32(2), 230-249.
- Watson, A., & Stanworth, J. (2006). Franchising and intellectual capital: a franchisee’s perspective. Entrepreneurship Management, 2(3), 337-349.
- Wernerfelt, B. (1984). A resource-based view of the firm. Strategic Management Journal, 5(2), 171-180.
- Xu, J., & Li, J. (2022). The interrelationship between intellectual capital and firm performance: evidence from China’s manufacturing sector. Journal of Intellectual Capital, 23(2), 313-341.
- Xu, J., & Wang, B. (2018). Intellectual capital, financial performance, and companies’ sustainable growth: Evidence from the Korean manufacturing industry. Sustainability, 10(12), 4651.
- Yen, S. B., Lee, C. A., & Arokiasamy, L. (2019). Review of Empirical Research on Intellectual Capital and Financial Performance in the Banking Sector. Global Business and Management Research, 11(1), 538.
-
The impact of strategic human resources planning on the organizational performance of public shareholding companies in Jordan
Shaker Al-Qudah ,
Abdallah Mishael Obeidat ,
Hosam Shrouf ,
Mohammed A. Abusweilem
doi: http://dx.doi.org/10.21511/ppm.18(1).2020.19
Problems and Perspectives in Management Volume 18, 2020 Issue #1 pp. 219-230 Views: 3217 Downloads: 3290 TO CITE АНОТАЦІЯPerformance management (PM) is a common practice used by organizations to assess and manage employees’ work. Much of PM research is closely related to management practices. Corporations in the public and nonprofit sector continuously develop PM programs to ensure the sustainability of their organizations.
The study aims to analyze the impact of strategic human resources planning on the organizational performance of Jordanian public shareholding companies for senior management and functional unit managers (human resources, marketing, finance, and accounting). The researchers surveyed all the public shareholding companies registered with the Jordan Securities Commission (JSC) in 2019, wherein they found that only 60 companies applied strategic planning and human resources planning (HRP) together. Two hundred and twenty questionnaires were distributed in 52 companies surveyed, and 203 were adopted for statistical analysis. Several statistical methods were used, most notably the multiple regression analysis. The researchers found out a statistically significant impact of the strategic human resources planning (integration of HRP and strategic planning; strategic participation) on organizational performance. The results showed that adopting the strategic HRP dimensions leads to an increase in an organization’s overall productivity, employee satisfaction and reputation, as well as reduced operating costs. HR managers must understand the effectiveness of strategically designed HR practices across functions. -
Industrial development in Saudi Arabia: disparity in growth and development
Anis Ali
doi: http://dx.doi.org/10.21511/ppm.18(2).2020.03
Problems and Perspectives in Management Volume 18, 2020 Issue #2 pp. 23-35 Views: 3004 Downloads: 1021 TO CITE АНОТАЦІЯIndustrial development in any nation plays a vital role in the strengthening of the economy and employs human resources as per specifications and directly towards the mainstream of the nation. In Saudi Arabia, there was rapid industrialization for four decades. Some manufacturing industries performed well, while some internal and external business environment factors influenced the others’ performance. The study focuses on historical development, as well as recent trends of well-performing and poor-performing industries of Saudi Arabia. Small manufacturing industries in Saudi Arabia are underdeveloped and need more attention to attain sustainable and progressive growth rate in the form of the number of establishments to enjoy the potential. Manufacture of tobacco, computer, electronics and optics, pharmaceuticals and transport equipment are the deprived and underdeveloped industries of the manufacturing sector. There should be some easy credit schemes for the development of deprived or underdeveloped manufacturing industries. To attain sustainable growth and development of the manufacturing sector, a positive attitude of the government towards underdeveloped manufacturing industries, favorable labor laws, and entrepreneurial awareness, technical and financial assistance are necessary. The growth and development of the manufacturing sector of Saudi Arabia will be helpful in the attainment of goals of Vision 2030.
-
Why banks should consider ESG risk factors in bank lending?
Sarwar Uddin Ahmed ,
Samiul Parvez Ahmed ,
Ikramul Hasan
doi: http://dx.doi.org/10.21511/bbs.13(3).2018.07
Banks and Bank Systems Volume 13, 2018 Issue #3 pp. 71-80 Views: 2817 Downloads: 1132 TO CITE АНОТАЦІЯWhy banks should be concerned about incorporating environmental, social and governance (ESG) criteria in the lending process? What is the motivation? This study aims to find the motives for considering environmental, social and governance (ESG) criteria in bank lending process. A primary survey has been conducted to know the current status and motivation for incorporating ESG factors in investment decisions. Sample comprised 30 private commercial banks (PCBs) operating in Bangladesh. Data collected were analyzed with graphs, descriptive statistics, and regression analysis. Findings of the study indicate that banks are mostly considering basic environmental, social and governance factors set by regulators qualitatively. They are lagging behind in considering the advanced ESG criteria needed for sustainable and efficient credit risk management. Based on motivation for incorporating ESG factors, it was found that banks pioneering in incorporating ESG factors in lending decisions are compensated through better financial performance. Findings of the study are expected to encourage practitioners and policy-makers to take more pragmatic steps to incorporate ESG risk factors quantitatively in lending decision-making process.
