Effects of Intellectual Capital Cost on Performance of Selected deposit Money Banks Quoted in Nigeria
- June 22, 2022
- Posted by: rsispostadmin
- Categories: architecture engineering, Engineering, IJRISS, Social Science
International Journal of Research and Innovation in Social Science (IJRISS) | Volume VI, Issue V, May 2022 | ISSN 2454–6186
Akinsulire, Oyemolu Olugbenga
Babcock University, Nigeria
Abstract: The lack of consensus in reporting on the impact of intellectual capital cost on overall organizational value necessitated the current study. The purpose of this research paper is to explore the effect of intellectual capital (IC) and its various components on the financial and market performance of Nigerian Deposit Money Banks (DMBs). Data for the study were extracted from the audited financial statements of Deposit Money Banks (DMBs) listed on the NigerianExchange over a ten-year period (2011-2020) as at 31st December 2020, and independent variables derived from Public’s (2000) Modified Value-Added Intellectual Capital Adequacy Ratio (MVAICAR) components were regressed against dependent bank performance metrics (Return on Assets (ROA) and Market to Book value of equity proxy by Tobin’s Q (TQ). Expo facto design was employed and the multiple regression technique was used to determine the existence of relationship between the variables. Human CapitalAdequacy Ratio (HCAR), Relational Capital Adequacy (RCAR), and Capital Employed Adequacy Ratio (CEAR) were all positively and significantly related to ROA (P=0.000,0.000,0.0400 =0.003,0.439,0.067 at 5 percent significant level), whereas Structural Capital Adequacy Ratio (SCAR) was positively related but insignificant (P=0.130 =0.011at 5 percent). HCAR and RCAR, on the other hand, were favorably and considerably associated to Tobin’s Q (P=0.001,0.0.009=5.03,3.31 at 5 percent significance level), whereas CEAR and SCAR were positive but negligible (P=0.972,0.644=0.04,0.48 at 5 percent significance level). The findings from the study revealed that investing in overall intellectual capital components have a positive and significant effect on the financial and market performance of Nigerian Deposit Money Banks and recommend that regulators should incorporate Intellectual Capital investment as part of the framework for improving and reinforcing banks reporting system on performance and value.
Key Words: Capital Employed Adequacy Ratio, Intellectual Capital Components, Relational Capital Adequacy Ratio, Tobin’s Qand Structural Capital Adequacy Ratio.
I. BACKGROUND TO THE STUDY
In today’s dynamic business environment, especially in the banking industry, where knowledge and information are critical to their very existence and survival, intellectual capital is gradually assuming the characteristic of a “product,” thereby increasing the awareness that a company’s stock to intangible assets ratio is a critical factor in its ability to sustain a competitive advantage John-Akamelu and Iyidiobi(2018). According to Oyeakwelu and Okoh (2020), knowledge-based intangible assets in particular are recognized as critical to the wealth creation process and have evolved into the primary competitive differentiator for organizations in virtually all industries, particularly service-based firms. Subsequently, the OECD (2000) as cited by Oyeakwelu and
