An Empirical Investigation on Intellectual Capital Performance : Evidence from Banking Sector

The purpose of this study is to investigate, empirically, the association between intellectual capital (IC) with productivity, profitability and investor response. This study was carried out using data drawn from NYSE listed banking sector firms in the US over the financial years 2000 to 2010. Multiple and pooled regression techniques used to test the hypothesized relationships between IC with productivity, profitability and investor response. IC level of firms, on average, has declined over the years with a substantial decrease in 2001, 2002, 2007 and 2008, seemingly during financial turbulent periods. Regression results of pooled model indicate positive and highly statistically significant associations between IC and productivity, profitability and investor response. Value creation of physical capital stands equally important as IC in our regression models. Firm leverage, firm size and earnings for shareholders are generally significant as well. The study provides evidence for IC practitioners about how IC may enhance productivity, profitability and investor response in the banking sector firms. This study provides a detailed analysis on IC performance of NYSE banking sector using longitudinal data. Also it adds evidence on the behaviour of IC and its associations with corporate performance in the long-run. The findings of significantly positive associations of IC with firm performance implied important empirical validations on the role of IC as a strategic asset. Further the study extends the prior efforts to empirically validate the VAICTM method to diverse settings