A study of determinants of intellectual capital performance in banks: the UK case

Abstract

Purpose: The purpose of this paper is to investigate the determinants of intellectual capital performance in the UK banks over the period 1999‐2005.Design/methodology/approach: Multiple regression analysis is used to test the relationship between the intellectual capital performance as a dependent variable and certain independent variables.Findings: Results indicate that the standard variables, bank profitability and bank risk, are important. The results also show that investment in information technology (IT) systems, bank efficiency, barriers to entry and efficiency of investment in intellectual capital variables, which have not been considered in previous studies, have a significant impact on intellectual capital performance.Research limitations/implications: More evidence is needed on the determinants of intellectual capital performance before any generalisation of the results can be made. In addition, the empirical tests were conducted only on the Major British Banks Group over the period 1999‐2005 and hence the results of the study cannot be assumed to extend beyond this group of banks or to different study periods.Practical implications: The study might help the banking regulators in addressing the factors affecting intellectual capital performance to take actions towards developing their performance and in turn maximise their value creation.Originality/value: This paper adds to the literature on the determinants of intellectual capital performance in banks. In particular, it tests the theories that investment in IT systems, bank efficiency, barriers to entry and efficiency of investment in intellectual capital have impact on intellectual capital performance.