Does intellectual capital lead to greater financial performance and stability? Evidence from banking markets in Africa

This study examines the effects of intellectual capital (IC) on the financial performance and stability of banks. This study uses the system generalised-method-of-moments and ordinary least squares panel-corrected standard errors estimation techniques to estimate panel regressions based on the data of 366 banks from 26 African countries. The results suggest that IC has positive effects on financial performance. Intellectual capital's relationship with financial stability is not consistent and significant across the estimations. Also, human capital efficiency has a positive relationship with financial performance; capital employed efficiency has a negative relationship with financial stability. Basically, not all elements of IC have positive effects on the financial performance and stability of banks. The findings suggest that policymakers must initiate and design regulations and policies to help deploy and manage IC investments in strategic ways.