Intellectual Capital and financial performance: Evidence from the Indian Banking Industry

This study seeks to estimate and analyze the relationship between intellectual capital and financial performances of 70 Indian banks for a period of ten years from 1999 to 2008. Value Added Intellectual Coefficient (VAIC (TM)) method is applied for measuring the value based performance of the companies. Financial performance measures used in this analysis are (1) return on assets (2) return on equity (profitability) and (3) assets turnover ratio (productivity) of Indian Banks. The intellectual capital (human capital and structural capital) and physical capital of selected banks have been analyzed and their impact on corporate performance has been measured using multiple regression technique. The analysis indicates that the relationships between the performance of a bank's Intellectual Capital, and financial performance indicators namely, profitability, productivity are varied. The study results suggest that banks' intellectual capital is vital for their competitive advantage.