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Intellectual Capital: Its Effect on Financial Performance of Indian Public and Private Sector Banks

Virender Singh Thakur

In this study the value added intellectual coefficient (VAIC) methodology has been used to find out the intellectual capital (IC) performance of listed public and private banks in India and to find the effects of IC on the financial performance of the banks during the period 2013 to 2015. There are two financial performance indicators for Indian banks which are Return on Asset (ROA) and Return on Equity (ROE). The annual reports of the banks have been used to obtain the data. The panel data taken has been analyzed using panel regression method. The intellectual capital contains physical capital, human capital and structural capital as its components. These components of banks have been analyzed. The results show that intellectual capital performance of Indian banks is much better than the intellectual performance in other countries but it has come down from 2013 to 2015. The component of VAIC which affected most significantly the financial performance of the banks in the Physical capital. But the components of VAIC show a different relationship with the financial performance of banks.