Should Listed Banks Be Concerned with Intellectual Capital in Emerging Asian Markets? A Comparison between China and Pakistan

Abstract

The purpose of this study is to determine and compare the relationship between intellectual capital (IC) and banks’ performance in China and Pakistan. The data are acquired from listed banks in these two countries during 2010–2018. The Value Added Intellectual Coefficient (VAIC™) method is applied as a measure of IC. The results show that capital employed efficiency (CEE) makes the highest contribution to bank performance in both countries. In addition, the profitability of listed Chinese banks is driven by structural capital efficiency (SCE), while human capital efficiency (HCE) positively affects bank profitability and productivity in Pakistan. In addition, we find that the lagged effect of IC has a positive impact on future bank profitability. This study supports greater investment in IC in order to further improve bank performance in emerging Asian markets.