Management Dynamics

Open Access Open Access  Restricted Access Subscription Access

A Study of Value – Added Efficiency in the Indian Banks


Affiliations
1 Lecturer, CCBA, Dhofar University, PB 2509, Salalah 211, Oman
2 Assistant Professor, Department of Management Studies, Faculty of Management & Commerce MS Ramaiah University of Applied Sciences New BEL Road, Bangalore, India
 

Purpose: This paper explores the importance of Intellectual Capital (IC) in the Indian Banking Industry and compares the efficiency between Public Sector Undertaking (PSU) banks and Private Sector banks, by employing Value Added Intellectual Coefficient (VAIC) method.
Methodology/approach: Using Path Analysis, the study verifies the influence of VAIC on the profitability and market value of the Indian banks. Using simple averages and graphs, VAIC of PSU and Private Banks are compared. Quarterly results are used to verify the impact of COVID on the VAIC of banks.
Findings: Human Capital Efficiency (HCE) is the largest element that contributes to the VAIC in the Indian Banks. VAIC and HCE are greater in the private sector banks than in PSU banks. HCE does contribute to the profitability of banks, whereas no evidence is found of VAIC or HCE making any contribution towards the market value. While VA and HCE fell sharply in the PSU banks and not so sharply in the Private Banks during the first wave of COVID, the recovery has been impressive, in both sectors.
Practical implications: The paper clearly brings out the role of Human Capital Efficiency (HCE) in the Indian Banks and the need to improve HCE in the PSU Banks.

Keywords

Value Added, Banking, Profitability, Market Value, Human capital
User
Notifications
Font Size

  • Bhatt S (2018). Validate Peter Lynch Model on Indian Stock Market. Management Dynamics. Vol 18 (1). PP 23-30.

  • Bontis, N. (2001), “Assessing knowledge assets: a review of the models used to measure intellectual capital”, International Journal of Technology Management. 20 (1).pp. 41-60.

  • Bontis, N., Chong Keow, W.C. and Richardson, S. (2000), “Intellectual capital and business performance in Malaysian industries”, Journal of Intellectual Capital. 1 (1), pp. 85-100.

  • Chavali K., Prasad C., & Rao KSS (2019). Demonetization and its impact on digitization in India. Management Dynamics. Vol. 19 (1). PP 19-34.

  • Chen, M.C., Chen, S.J. and Hwang, Y. (2005), “An empirical investigation of the relationship between intellectual capital and firm’s market value and financial performance”, Journal of Intellectual Capital, Vol. 6 No. 2, pp. 159-76.

  • Chu,S.K.W.,Chan,K.H .& Wu,W.Y. (2011), “Charting intellectual capital performance of the gateway to China”, Journal of Intellectual Capital, Vol. 12, No., pp. 249-76.

  • Firer, S., and Williams, S.M. (2003), “Intellectual capital and traditional measures of corporate performance”, Journal of Intellectual Capital, Vol. 4 No. 3, pp. 348-60.

  • Ghosh, S. and Mondal, A. (2009), “Indian software and pharmaceutical sector IC and financial performance”, Journal of Intellectual Capital, Vol. 10 No. 3, pp. 369-88.

  • Kamath B. (2007). The Intellectual Capital Performance of Indian Banking Sector. Journal of Intellectual Capital, 8(1).

  • Kamath, B. (2015). Impact of Intellectual capital on Financial Performance and Market Valuation of Firms in India. International letters of Social and Humanistic Sciences Vol. 48. Pp 107-122.

  • Maji, SG & Chakrabarty TK (2019). Heterogeneity in the Intellectual Capital and Performance of Indian Commercial Banks: Panel Data, Quantile Regression Analysis. Bank Parikrama. Volume XLIV, Nos. 1 & 2, March & June 2019 (pp. 27-52).

  • Nagaraja N & Vinay N (2016). The Effect of Intangible Assets on the Firm Value. International Journal of Engineering and Management Research. Volume-6, Issue-1, January-February-2016 . pp: 307-315.

  • Pulic A (1998), “Measuring the Performance of Intellectual Capital in Knowledge Economy”, available at www.measuring-ip.at /Opapers/Pulic/Vaictxt.vaictxt.html (Accessed on October 25, 2014).

  • Pulic A (2000a), “VAIC: An Accounting Tool for IC Management”, International Journal of Technology Management, Vol. 20, Nos. 5/6/7/8, pp. 545-55.

  • Pulic A (2000b), “MVA and VAIC Analysis of Randomly Selected Companies from FTSE 250”, available at vaic-on.net/downloads/ftse30.pdf (Accessed on October 26, 2014).

  • Pulic A and Bornemann M (1999), The Physical and Intellectual Capital of Austrian Banks.

  • Pulic, A. (2004), “Intellectual capital – does it create or destroy value?”, Measuring Business Excellence, Vol. 8 No. 1, pp. 62-8.

  • Pulic, A. (2005), Value Creation Efficiency at National and Regional Levels: Case Study – Croatia and The European Union, in A. Bounfour & L. Edvinsson (Eds), Intellectual Capital for Communities, Elsevier, Oxford.

  • Purohit, H. & Tandon K. (2015). Intellectual Capital, Financial Performance and Market Valuation: A Study on IT and Pharmaceutical Companies in India.

  • Rosario S (2020). Impact of Economic Policy Uncertainty on Key Economic Indicators of India.

  • Management Dynamics. Vol 20 (1). PP26-38.

  • Saif S, Abidi A., Faisal SM., Khan A (2019). Payment Mode influencing Consumer Behavior: Cashless Payment Vs Conventional Payment System in India. Management Dynamics. Vol 19(1). PP 45-56.

  • Sha N., Mohamed S. & Kumar A. (2018). Value of due diligence exhibited by customer in banking institutions. Management Dynamics. Vol 18 (2). PP 26-49.

  • Shaban, M. & Kavida, V. (2013), “Intellectual Capital, Financial Performance and Market Valuation: An Empirical Investigation of Information Technology Industry in India”, Asia Pacific Journal of Management Research and Innovation, Vol. 9, No. 1, pp. 55-62.

  • Stahle P, Aho S & Stahle S (2011). Value Added Intellectual Coefficient (VAIC): a critical analysis. Journal of Intellectual Capital.

  • Stewart T.A. (1991). Brainpower. How Intellectual Capital is becoming America’s Most Valuable Asset. Fortune 3rd June.

  • Sveiby,E.(2001), “Methods for measuring intangible assets”, available at: www.sveiby.com/ articles/IntangibleMethods.htm (accessed April 2, 2007).

  • Trivedi JC (2013). Performance Analysis of Bankex Banks through CAMEL Model. Management Dynamics. Vol 13(2). PP 1-13.

  • Xu, J., & Liu, F. (2020). The Impact of Intellectual Capital on Firm Performance: A Modified and Extended VAIC Model. Journal of Competitiveness, 12(1), 161–176.


Abstract Views: 252

PDF Views: 111




  • A Study of Value – Added Efficiency in the Indian Banks

Abstract Views: 252  |  PDF Views: 111

Authors

Shireen Rosario
Lecturer, CCBA, Dhofar University, PB 2509, Salalah 211, Oman
Chandra Sen Mazumdar
Assistant Professor, Department of Management Studies, Faculty of Management & Commerce MS Ramaiah University of Applied Sciences New BEL Road, Bangalore, India

Abstract


Purpose: This paper explores the importance of Intellectual Capital (IC) in the Indian Banking Industry and compares the efficiency between Public Sector Undertaking (PSU) banks and Private Sector banks, by employing Value Added Intellectual Coefficient (VAIC) method.
Methodology/approach: Using Path Analysis, the study verifies the influence of VAIC on the profitability and market value of the Indian banks. Using simple averages and graphs, VAIC of PSU and Private Banks are compared. Quarterly results are used to verify the impact of COVID on the VAIC of banks.
Findings: Human Capital Efficiency (HCE) is the largest element that contributes to the VAIC in the Indian Banks. VAIC and HCE are greater in the private sector banks than in PSU banks. HCE does contribute to the profitability of banks, whereas no evidence is found of VAIC or HCE making any contribution towards the market value. While VA and HCE fell sharply in the PSU banks and not so sharply in the Private Banks during the first wave of COVID, the recovery has been impressive, in both sectors.
Practical implications: The paper clearly brings out the role of Human Capital Efficiency (HCE) in the Indian Banks and the need to improve HCE in the PSU Banks.

Keywords


Value Added, Banking, Profitability, Market Value, Human capital

References