Impact of Intellectual Capital on Bank Performance during COVID-19: Evidence from a Developing Economy

Abstract

The purpose of this study is to assess the impact of intellectual capital (IC) on bank performance during the pre-and post-COVID-19 period. A balanced quarterly panel data of 29 banks from the banking sector of Bangladesh from 2018 to 2022 is used to assess this empirical issue. IC of banks is measured by the value-added intellectual capital while bank performance is measured by return on average asset (ROAA), return on average equity (ROAE), bank efficiency (EFF), and Tobin’s Q (MTQ). The pooled ordinary least square with panel corrected standard error model has been used for the panel estimation. The results show that IC is positively associated with the ROAA, ROAE, and EFF but negatively associated with the market-based performance measure, MTQ. It is also evident that the performance-enhancing effect of IC is larger in the post-COVID period than in the pre-COVID period, thus indicating the importance of IC for sustainable bank performance during the crisis. In addition, a non-linear or U-shaped relationship between IC and bank performance is observed. Thus, the study contributes to the empirical literature by highlighting the difference in the impact of IC on bank performance in a developing economy like Bangladesh during the pre-COVID and post-COVID periods, which requires the policymakers to promote IC for ensuring sustainable bank performance during the crisis.