Measuring Intellectual Capital and Financial Performance of Indian Banks Post and Pre Demonetization: A VAIC Perspective

Abstract

This article is aiming to observe the relationship between investment
in intellectual capital and intangibles on the firm’s financial
performance. Indian banking sector is taken into consideration to
quantify the impact of intangibles and intellectual capital on its
profitability and financial performance. Another agenda is to
measure the impact of demonetization on the performance of
overall banking sector in India. This study further helps to measure
the intellectual capital between public and private sector banks. The
analysis of the study was based secondary data of a sample of 20
banks. The study was done on the basis of VAIC (Value Added
Intellectual Coefficient, coefficient of correlation, Yule’s coefficient
and Levene’s test for equality of variance (F-Test). From the study
we found that for public sector banks VAIC and ROA are positively
correlated. The results showcased considerable variations between
public and private sector banks as far as formation of intellectual
capital is concerned. There is a tangible difference in intellectual
capital before and after demonetization of public sector banks as
well as private sector. According to Yule’s coefficient of association,
VAIC and ROA have inverse relationship. The study will contribute to
the strategic decision-makers of banks to formulate the policies and
strategies regarding investing in human and intellectual capital.