Relationship between Bank Risk and Intellectual Capital in the GCC Countries: An Empirical Analysis
Abstract
The primary goal of this study is to determine the effect of intellectual capital efficiency (), also known as knowledge capital, and its components, including human capital efficiency () and structural capital efficiency (), on bank risk-taking behavior in GCC countries. This study investigates the impact of intellectual capital (IC) on risk management in the banking sectors of the Gulf Cooperation Council (GCC) countries. The scientific novelty of this research lies in its focus on an underexplored area, as there has been limited previous research on the influence of IC on risk-taking, specifically in the context of GCC countries' banking sectors. By examining the relationship between IC and risk management in this region, this research contributes to the existing body of knowledge in several ways. First, it expands the understanding of how intellectual capital, which encompasses knowledge, expertise, intellectual property, and information, can affect risk management practices within banks. This exploration provides valuable insights into the role of IC as a potential lever for mitigating risks and enhancing the performance of banking institutions. To demonstrate this impact, the study used the generalized method of moment (GMM) estimator, the ordinary least square estimate (to test robustness), and unbalanced panel data from 172 banks in GCC countries, totaling 3268 bank-year observations from 2000 to 2019. Our findings show that is strongly and positively related to a bank’s credit risk, indicating that credit risk increases as intellectual capital efficiency also increases and both human and structural capital efficiency rise. In addition, bank performance (), , macrovariable inflation, and size have a negative impact on bank risk, whereas has a positive one. Finally, the study’s findings will be useful to stakeholders, policymakers, and academics for future research.
Keywords: intellectual capital, efficiency, risk-taking.
Full Text:
PDFReferences
STEWART T. A. Intellectual Capital: The New Wealth of Organizations. Doubleday, New York, 1997.
MONDAL A., & GHOSH S. K. Intellectual Capital and Financial Performance of Indian Banks. Journal of Intellectual Capital, 2012, 13(4): 515-530. https://doi.org/10.1108/14691931211276115
CAHYANINGRUM A. D., & ATAHAU A. D. R. Intellectual capital and financial performance: banks’ risk as the mediating variable. Jurnal Manajemen dan Kewirausahaan, 2020, 22(1): 21-32. https://doi.org/10.9744/jmk.22.1.21-32
BRANCO M. C., DELGADO C., SOUSA C., and SA M. Intellectual capital disclosure media in Portugal. Corporate Communications: An International Journal, 2011, 16(1): 38-52. https://doi.org/10.1108/13563281111100962
HARIS M., YAO H., TARIQ G., JAVAID H. M., and AIN Q. U. Corporate governance, political connections, and bank performance. International Journal of Financial Studies, 2019, 7(4): 62. https://doi.org/10.3390/ijfs7040062
ALHASSAN A. L., & ASARE N. Intellectual capital and bank productivity in emerging markets: evidence from Ghana. Management Decision, 2016, 54(3): 589-609. https://doi.org/10.1108/MD-01-2015-0025
REHMAN A. U., ASLAM E., and IQBAL A. Intellectual capital efficiency and bank performance: evidence from Islamic banks. Borsa Istanbul Review, 2022, 22(1): 113-121. https://doi.org/10.1016/j.bir.2021.02.004
ATIKU S., KAISARA G., KAUPA S., and VILLET H. Dimensions of learning organization: Implications for human resources effectiveness in commercial banks. Management Science Letters, 2022, 12(2): 117-124. http://dx.doi.org/10.5267/j.msl.2021.10.002
OZKAN N., CAKAN S., and KAYACAN M. Intellectual Capital and Financial Performance: A Study of the Turkish Banking Sector. Borsa Istanbul Review, 2017, 17(3): 190-198. https://doi.org/10.1016/j.bir.2016.03.001
PAOLONI P., MASSARO M., DAL MAS F., and BAGNOLI C. Microfoundations of intellectual capital. Evidence from Italian small accounting firms. Knowledge Management Research & Practice, 2023, 21(4): 725-737. https://doi.org/10.1080/14778238.2021.2023676
DEMARTINI M. C., & BERETTA, V. Intellectual capital in SMEs: a review and research agenda. International Journal of Learning and Intellectual Capital, 2022, 19(1): 5-29. http://dx.doi.org/10.1504/IJLIC.2021.10036643
JOSHI M., CAHILL D., SIDHU J., and KANSAL M. Intellectual capital and financial performance: An evaluation of the Australian financial sector. Journal of Intellectual Capital, 2013, 14(2): 264–285. https://doi.org/10.1108/14691931311323887
SARI A., & HIDAYAT I. The Effect of Company Size, Systematic Risk and Independent Commissioners on Disclosure of Intellectual Capital. Economics and Accounting Journal, 2020, 3(3): 163-171. http://dx.doi.org/10.32493/eaj.v3i3.y2020.p163-171
NGUYEN D. T., LE T. D., and HO T. H. Intellectual Capital and Bank Risk in Vietnam—A Quantile Regression Approach. Journal of Risk and Financial Management, 2021, 14(1): 27. https://doi.org/10.3390/jrfm14010027
NAZIR M. I., YONG T., and NAZIR M. R. Intellectual capital performance in the financial sector: Evidence from China, Hong Kong, and Taiwan. International Journal of Finance and Economics, 2021, 26(4): 6089-6109. https://doi.org/10.1002/ijfe.2110
NGUYEN T. P. T., & NGHIEM S. H. The interrelationships among default risk, capital ratio and efficiency: Evidence from Indian banks. Managerial Finance, 2015, 41(5): 507-525. https://doi.org/10.1108/MF-12-2013-0354
OBEIDAT B. Y., TARHINI A., MASA’DEH R., and AQQAD N. The impact of intellectual capital on innovation via the mediating role of knowledge management: A structural equation modelling approach. International Journal of Knowledge Management Studies, 2017, 8(3-4): 273–298. https://doi.org/10.1504/IJKMS.2017.087071
HARIS M., YAO H., TARIQ G., MALIK A., and JAVAID H. M. Intellectual capital performance and profitability of banks: Evidence from Pakistan. Journal of Risk and Financial Management, 2019, 12(2): 56. https://doi.org/10.3390/jrfm12020056
ANDREOU A. N., GREEN A., and STANKOSKY M. A framework of intangible valuation areas and antecedents. Journal of Intellectual Capital, 2007, 8(1): 52-76. https://doi.org/10.1108/14691930710715060
EDVINSSON L. Developing intellectual capital at Skandia. Long Range Planning, 1997, 30(3): 366-373. https://doi.org/10.1016/S0024-6301(97)00016-2
SULLIVAN P. H. Value-driven intellectual capital: how to convert intangible corporate assets into market value. John Wiley & Sons, 2000.
MOURITSEN J., LARSEN H. T., and BUKH N. Intellectual capital and the ‘capable firm’: narrating, visualising and numbering for managing knowledge. Accounting, Organizations and Society, 2001, 26(7-8): 735-762. http://dx.doi.org/10.1016/S0361-3682(01)00022-8
SVEIBY K. E. The new organizational wealth: Managing and measuring knowledge-based assets. Berrett-Koehler Publishers, San Francisco, California, 1997.
BONTIS N. There’s a Price on your Head: Managing Intellectual Capital Strategically. Business Quarterly, 1996, 60: 41-47.
EDVINSSON L., & SULLIVAN P. Developing a model for managing intellectual capital. European Management Journal, 1996, 14(4): 356-364. https://doi.org/10.1016/0263-2373(96)00022-9
GU F., & LEV B. Intangible assets–measurement, drivers, usefulness. Boston University, New York University, 2001.
ANDRIESSEN D. On the metaphorical nature of intellectual capital: a textual analysis. Journal of Intellectual Capital, 2006, 7(1): 93-110. http://dx.doi.org/10.1108/14691930610639796
BONTIS N. National intellectual capital index: a United Nations initiative for the Arab region. Journal of Intellectual Capital, 2004, 5(1): 13-39. http://dx.doi.org/10.1108/14691930410512905
JOSHI M., CAHILL D., and SIDHU J. Intellectual capital performance in the banking sector: An assessment of Australian owned banks. Journal of Human Resource Costing & Accounting, 2010, 14(2): 151-170. http://dx.doi.org/10.1108/14013381011062649
PULIC A. Measuring the Performance of Intellectual Potential (IP) in Knowledge Economy. In: TIFFANY C., & JENNIFER S. (eds.) 19th Annual National Business Conference. DeGroote School of Business, 1998. https://www.bib.irb.hr/35384
PULIC A. VAIC™ – an accounting tool for IC management. International Journal of Technology Management, 2000, 20(5-8): 702-714. https://doi.org/10.1504/IJTM.2000.002891
PULIC A. Intellectual capital – does it create or destroy value? Measuring Business Excellence, 2004, 8(1): 62-68. https://doi.org/10.1108/13683040410524757
BONTIS N. Assessing knowledge assets: a review of the models used to measure intellectual capital. International Journal of Management Reviews, 2001, 3(1): 41-60. http://dx.doi.org/10.1111/1468-2370.00053
CHOONG K. K. Intellectual Capital: Definitions, Categorization and Reporting Models. Journal of Intellectual Capital, 2008, 9(4): 609-638. http://dx.doi.org/10.1108/14691930810913186
ALTUNBAS Y., CARBO S., GARDENER E. P. M., and MOLYNEUX P. Examining the relationships between capital, risk and efficiency in European banking. European Financial Management, 2007, 13(1): 49-70. https://doi.org/10.1111/j.1468-036X.2006.00285.x
GHOSH S. K., & MAJI S. G. The impact of intellectual capital on bank risk: Evidence from Indian banking sector. The IUP Journal of Financial Risk Management, 2014, 11(3): 18-38. https://www.iupindia.in/1409/Financial%20Risk%20Management/The_Impact_of_Intellectual_Capital.html
ZHENG C., GUPTA A. D., and MOUDUD-UL-HUQ S. Do human capital and cost efficiency affect risk and capital of commercial banks? An empirical study of a developing country. Asian Economic and Financial Review, 2018, 8(1): 22-37. http://dx.doi.org/10.18488/journal.aefr.2018.81.22.37
ZHENG C., GUPTA A. D., and MOUDUD-UL-HUQ S. Effect of human capital efficiency on bank risk-taking behavior and capital regulation: empirical evidence from a developing country. Asian Economic and Financial Review, 2018, 8(2): 231-247. http://dx.doi.org/10.18488/journal.aefr.2018.82.231.247
NAWAZ M., NOR A. M., and TOLOS H. The Moderating Role of Intellectual Capital between Relationship of Bank Specific Factors and Credit Risk of Islamic Banks: Evidence from Pakistan. SEISENSE Journal of Management, 2019, 2(4): 79-87. http://dx.doi.org/10.33215/sjom.v2i4.173
INNAYAH M. N., PRATAMA B. C., and HANAFI M. M. The Effect of Intellectual Capital towards Firm Performance and Risk with Board Diversity as a Moderating Variable: Study in ASEAN Banking Firms. JDM (Jurnal Dinamika Manajemen), 2020, 11(1): 27-38. https://doi.org/10.15294/jdm.v11i1.21487
ALRASHIDI A., & ALARFAJ O. The Impact of Intellectual Capital Efficiency on Bank Risks: Empirical Evidence from the Saudi Banking Industry. International Journal of Economics and Financial Issues, 2020, 10(4): 206-214. http://dx.doi.org/10.32479/ijefi.9959
GUIMÓN J. Intellectual capital reporting and credit risk analysis. Journal of Intellectual Capital, 2005, 6(1): 28-42. https://doi.org/10.1108/14691930510574645
SUN L., & CHANG T. P. A comprehensive analysis of the effects of risk measures on bank efficiency: Evidence from emerging Asian countries. Journal of Banking & Finance, 2011, 35(7): 1727-1735. http://dx.doi.org/10.1016/j.jbankfin.2010.11.017
KWAN S., & EISENBEIS R. A. Bank risk, capitalization, and operating efficiency. Journal of Financial Services Research, 1997, 12(2): 117-131. http://dx.doi.org/10.1023/A:1007970618648
DEELCHAND T., & PADGETT C. The relationship between risk, capital and efficiency: Evidence from Japanese cooperative banks, 2009. https://dx.doi.org/10.2139/ssrn.1525423
FIORDELISI F., MARQUES-IBANEZ D., and MOLYNEUX P. Efficiency and risk in European banking. Journal of Banking & Finance, 2011, 35(5): 1315-1326. https://doi.org/10.1016/j.jbankfin.2010.10.005
TAN Y., & FLOROS C. Risk, capital and efficiency in Chinese banking. Journal of International Financial Markets, Institutions & Money, 2013, 26: 378-393. http://dx.doi.org/10.1016/j.intfin.2013.07.009
ISAAC R. G., HERREMANS I. M., and KLINE T. J. Intellectual capital management enablers: a structural equation modeling analysis. Journal of Business Ethics, 2010, 93(3): 373-391. https://doi.org/10.1007/s10551-009-0227-5
AIGNER D. J., LOVELL C. A. K., and SCHMIDT P. Formulation and Estimation of Stochastic Frontier Production Function Models. Journal of Econometrics, 1977, 1: 21-37. https://doi.org/10.1016/0304-4076(77)90052-5
ZHENG C., MOUDUD-UL-HUQ S., RAHMAN M. M., and ASHRAF B. N. Does the ownership structure matter for banks’ capital regulation and risk-taking behavior? Empirical evidence from a developing country. Research in International Business and Finance, 2017, 42: 404-421. https://doi.org/10.1016/j.ribaf.2017.07.035
GIRARDONE C., MOLYNEUX P., and GARDENER E. P. M. Analysing the determinants of bank efficiency: the case of Italian banks. Applied Economics, 2004, 36(3): 215-227. https://doi.org/10.1080/0003684042000175334
NIŢOI M. & SPULBAR C. An Examination of Banks’ Cost Efficiency in Central and Eastern Europe. Procedia Economics and Finance, 2015, 22: 544-551. https://doi.org/10.1016/S2212-5671(15)00256-7
SEALEY C. W., & LINDLEY J. T. Inputs, Outputs, and a Theory of Production and Cost at Depository Financial Institutions. The Journal of Finance, 1977, 32: 1251-1265. https://doi.org/10.1111/j.1540-6261.1977.tb03324.x
JONDROW J., KNOX LOVELL C. A., MATEROV I. S., and SCHMIDT P. On the estimation of technical inefficiency in the stochastic frontier production function model. Journal of Econometrics, 1982, 19(2–3): 233–238. https://doi.org/10.1016%2F0304-4076%2882%2990004-5
HANSEN L. P. Large Sample Properties of Generalized Method of Moments Estimators. Econometrica, 1982, 50: 1029–1054. https://doi.org/10.2307/1912775
HALL R. The strategic analysis of intangible resources. Strategic Management Journal, 1992, 13(2): 135-144. https://doi.org/10.1002/SMJ.4250130205
JOHER H., ALI M., and NAZRUL M. The impact of ownership structure on corporate debt policy: two stage least square simultaneous model approach for post crisis period: evidence from Kuala Lumpur Stock Exchange. International Business & Economics Research Journal, 2006, 5(5): 51-64. https://doi.org/10.19030/iber.v5i5.3480
ORJI A., & MBA P. N. Foreign Private Investment, Capital Formation and Economic Growth in Nigeria: a two stage least square approach. Journal of Economics and Sustainable Development, 2010, 6(8): 57-63. https://www.iiste.org/Journals/index.php/JEDS/article/download/131/11
MATEJAŠÁK M., TEPLÝ P., and ČERNOHORSKÝ J. The Impact of Regulation of Banks in the US and the EU-15 Countries. E+M Ekonomie a Management, 2009, 3: 58-68. https://www.ekonomie-management.cz/archiv/search/detail/667-the-impact-of-regulation-of-banks-in-the-us-and-the-eu-15-countries/
Refbacks
- There are currently no refbacks.
