Intellectual Capital amongst Commercial Banks in Malaysia

In order to maximize profits and to be more innovative, industry should not only focus on the physical capital but also on the intellectual capital. Further, intellectual capital is crucial in Malaysia’s development toward achieving Vision 2020. Hence, the aims of the study are to evaluate the intellectual capital efficiency and to examine the relationship between intellectual capital components and financial performance. Using 21 commercial banks in Malaysia in years 2008 to 2012, this study employs the Value Added Intellectual Coefficient (VAICTM) model and the Pooled Ordinary Least Square (POLS) estimation method. This study finds that AmBank (M) Berhad is the most efficient in utilizing its intellectual capital. Further, it is found that the intellectual capital components are positively associated with the financial performance. This study contributes towards the implementation of Malaysia’s Financial Sector Masterplan (FSMP) in enhancing banks’s operating efficiency, innovation and competition.