The Knowledge Edge: Intellectual Capital and Competitiveness in Taiwanese Banking

Abstract

This study explores determinants of bank performance in Taiwan by focusing on income diversification, leverage, and intellectual capital (IC). Utilizing data from 39 Taiwanese banks (2010-2022), the research employs System-GMM and random effects regression for robust findings. The Modified Value-Added Intellectual Coefficient (MVAIC) model measures IC, incorporating relational capital efficiency for comprehensive assessment. Five performance metrics—Operating Ratio, Earnings Per Share (EPS), Return on Equity (ROE), Revenue Growth, and Profit Margin—provide a holistic view of bank performance. Results reveal that income diversification enhances EPS, while leverage shows complex, nonlinear effects on performance. Relational and human capital efficiency (RCE and HCE) negatively correlate with ROE, indicating challenges in leveraging these IC components. Capital employed efficiency (CEE) improves operational efficiency but reduces profit margins. Efficiency metrics like the Malmquist Productivity Index (MPI) significantly influence performance, with total factor productivity (TFP) boosting EPS but adversely affecting the operating ratio. These findings highlight the need for strategic financial management and IC optimization. Implications for both theory and practice are discussed.