Intellectual capital – bank efficiency nexus: evidence from an emerging market

Abstract

This paper investigates the effect of intellectual capital (IC) and its components on the efficiency of Vietnamese commercial banks from 2007 to 2019 using the two-step Data Envelopment Analysis approach. Banks’ efficiency scores are firstly estimated, while the relationship between IC and bank efficiency is examined in the second stage. The results indicate a positive relationship between IC and banks’ pure technical efficiency, allocative efficiency, and total cost efficiency. When observing the effect of IC decompositions, the findings show that only human capital enhances all types of bank efficiency. Furthermore, bank size and liquidity risk are significant drivers of Vietnamese bank efficiency. Therefore, our findings suggest that bank managers should focus on intellectual capital, particularly human capital, to strengthen bank efficiency further.

Keywords:

• Intellectual capital
• bank efficiency
• DEA
• physical capital
• human capital
• structural capital

JEL classification:

• G21
• G28
• G30

Acknowledgements

This research is funded by the University of Economics and Law, Vietnam National University, Ho Chi Minh City, Vietnam.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1. This method relies on three sub-elements: structural capital efficiency (SCE), human capital efficiency (HCE), and capital employed efficiency (CEE), and makes use of these decompositions to estimate the Value-Added Intellectual Coefficient (VAIC; Pulic, 2004).

2. Please see, Bayraktaroglu et al. (2019) for comprehensive discussions on VAIC techniques.

3. We are aware that other market concentration metrics such as the Lerner index and the Rosse-Panzar could be used. However, these non-structure measurements have some significant shortcomings as discussed by Dietrich and Wanzenried (2014).

4. Please see, Le (2017) for more information.

5. Please see Appendix A3 for more details of estimated efficiency scores over the sample period.

6. Please see Appendix A2 for the VIFs statistics report.

Additional information

Funding

This research is funded by the University of Economics and Law, Vietnam National University, Ho Chi Minh City, Vietnam