Intellectual capital and technical efficiency of banks in an emerging market: a slack-based measure

Abstract

Purpose – This paper investigates the impact of intellectual capital and its components on slack-based technical efficiency (SBM-TE) of banks. Design/methodology/approach – Data envelopment analysis is used to compute SBM-TE scores and the Value-Added Intellectual Coefficient (VAIC™) model is used to measure intellectual capital. An unbalanced panel of 32 banks that operated from 2000 to 2017 has been used. Findings – Overall, the efficiency scores are averaged at 79%, suggesting that an inefficient bank needs to enhance technical efficiency by 21% to be at par with the best performing banks. Beta-convergence and sigmaconvergence exist among banks with faster speed evident among listed and local banks. Intellectual capital has a positive impact on SBM-TE and human capital is the main driver of technical efficiency among banks. This result is specifically evident among non-listed banks and foreign banks. Economies of scale property are also evident among the banks. Competition and asset tangibility inhibit technical efficiency among banks. Practical implications – Banks are advised to invest in value-adding emerging technologies and their employees so as to enhance their efficiency. The study offers insights for policymakers, practitioners and researchers in emerging markets. Originality/value – The study is premier in employing the SBM-TE to explain the in