Abstract
The main contribution of this paper is to report on the impact of intellectual capital (IC) on financial performance of Islamic banks operating in the UK. Two distinct measures, return on average assets (ROAA) and return on average equity (ROAE) are used to measure the financial performance. The paper also controls for number of employees and bank size. Results based on the regression analysis suggest that IC efficiency proxied by the value added intellectual coefficient (VAIC) relates positively with financial performance of Islamic banks in the UK. The analysis further suggests that bank size and number of employees equally contribute in banks' achieving higher financial performance. Additionally, the paper further ghettoises sub-components of IC namely; capital employed, human capital and structural capital to analyse the discrete impact of these IC constituents on financial performance. The analysis of the sub components suggests a positive relationship between physical and financial capital employed efficiency, human capital efficiency and performance.
Highlights
The main contribution of this paper is to report on the impact of intellectual capital (IC) on financial performance of Islamic banks operating in the United Kingdom (UK)
The UK financial services sector As stated above, the main objective of this research is to examine the impact of IC efficiency measured by value added intellectual coefficient (VAIC) and efficiency of sub-components of IC namely; capital employed efficiency, human capital efficiency and structural capital efficiency on financial performance based on return on average assets (ROAA) and return on average equity (ROAE) of Islamic banks operating in the UK financial services sector for the five years, 2013 to 2017 while controlling for bank size and number of employees
Summary and conclusion The main objective of this paper was to empirically investigate the impact of intellectual capital (IC) efficiency on financial performance of Islamic banks operating in the UK
Summary
The roots of modern Islamic banking and finance in the United Kingdom (UK) can be traced back to the early 1980s when a Middle-eastern banking group, Al Barakah started its banking operations in the UK. Islamic banks operate as interest free profit is mainly generated through various investment projects rather than mainly relying on the interest income as it the case in conventional banking system It is important measure the impact of capital-employed efficiency on financial performance. 3. The UK financial services sector As stated above, the main objective of this research is to examine the impact of IC efficiency measured by value added intellectual coefficient (VAIC) and efficiency of sub-components of IC namely; capital employed efficiency, human capital efficiency and structural capital efficiency on financial performance based on return on average assets (ROAA) and return on average equity (ROAE) of Islamic banks operating in the UK financial services sector for the five years, 2013 to 2017 while controlling for bank size and number of employees.
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