Abstract
This study aims to examine how the relationship between intellectual capital (IC) and bank profitability changed during COVID-19. Based on the data of 34 Chinese banks and 39 Pakistani banks, this study uses ordinary least squares (OLS) to examine this relationship during the COVID-19 era. Profitability is measured by return on assets (ROA) and return on equity (ROE), and IC is measured by the value added intellectual coefficient (VAIC) model. The findings show that, even during the COVID-19 pandemic, IC has managed to sustain its positive influence on bank profitability in China and Pakistan. Among IC components, our study reports that human capital is the only IC resource that continues to enhance ROA and ROE of Chinese and Pakistani banks during the pandemic period. Our study suggests that policymakers should pay more attention to IC resources, which has the potential to improve banks’ profitability even during crisis times.
Highlights
According to the World Health Organization (WHO), novel coronavirus disease 2019 (COVID-19) first appeared in December 2019 in Wuhan city, Hubei province of China
Regarding intellectual capital (IC) components, the mean Human capital efficiency (HCE) (3.700) and the mean structural capital efficiency (SCE) (0.687) of Chinese banks are higher than the mean HCE (2.353) and the mean SCE (0.433) of Pakistani banks, which implies that Chinese banks are more efficient to deal with human and structural capitals than Pakistani banks during the COVID-19 outbreak
The efficiency of capital employed in Pakistani banks is found to be higher than that in Chinese banks because the mean CEE (0.090) of Chinese banks is less than the mean CEE (0.229) of Pakistani banks
Summary
According to the World Health Organization (WHO), novel coronavirus disease 2019 (COVID-19) first appeared in December 2019 in Wuhan city, Hubei province of China. It seemed to catch global attention due to its rapid spread in January 2020. E WHO proclaimed the virus a global pandemic on 11 March 2020 and advised to take preventive actions During this pandemic, almost all countries have had travel ban, reduced or stopped flight operations, and implemented nationwide lockdowns to control the spread of this virus [1]. E COVID-19 crisis is causing turmoil in financial markets and a downturn in real economies [3, 4]. According to the International Monetary Fund (IMF), the gross domestic product (GDP) of all major economies like USA, China, and the European Union, shrank during COVID-19 [5]
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