Intellectual Capital and Financial Performance of Islamic Banks : Evidence from Malaysia and Indonesia

Chai, Siew Joo and Ahmad Syubaili, Mohamed (2022) Intellectual Capital and Financial Performance of Islamic Banks : Evidence from Malaysia and Indonesia. In: 10th International Borneo Business Conference 2022 (iBBC) 2022), 19-21 September 2022, Raia Hotel & Convention Centre Kuching, Sarawak.

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Abstract

The goal of this research is to gaze into the link between intellectual capital (IC) and the financial performance of Islamic banks in Malaysia and Indonesia. The sample collected for this empirical study covered five years of data started year 2016 until year 2020. The sample for this study is made up of 17 Malaysian Islamic banks and 13 Islamic banks in Indonesia. Regression analysis are used to determine the impact of value-added intellectual coefficient (VAIC) and its three components namely human capital efficiency (HCE), structural capital efficiency (SCE) and capital employed efficiency (CEE) on the Islamic banks’ performance which measured by return on assets (ROA) and return on equity (ROE). The results revealed that VAIC and HCE had a significant positive relationship with the profitability of Malaysian Islamic banks in terms of ROE, as well as the financial performance of Indonesian Islamic banks. Furthermore, the findings showed a significant positive relationship between SCE and Malaysian Islamic banks’ ROA, but no such relationship between SCE and Indonesian Islamic banks’ performance. The results also demonstrated a positive substantial association between CEE and the financial success of Malaysian Islamic banking. However, the CEE is found to have a mixed relationship with the financial performance of Indonesian Islamic banks.

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