Effect Of Intellectual Capital Costs On Financial Performance Of Listed Commercial Banks In Nigeria

ABSTRACT

The study examined the effect of intellectual capital costs on financial performance of listed commercial banks in Nigeria. Many researchers have carried out research on Intellectual Capital on financial performance but yet financial regulators have not been able to incorporate/disclose Intellectual Capital cost on Companies financial statement. More so, among the factors of production – Land, Labour, capital and Entrepreneurship- (Labour which is intellectual capital) is the only factor of production that is not reported in the financial statement. The study adopted the ex-post facto research design and was conducted using longitudinal/panel data collected from the annual reports and accounts of the selected banks in Nigeria for the period of ten years from 2007 to 2016. The fixed effect, random effect and the diagnostic houseman test was conducted to determine the appropriate regression. The results showed that there is significant relationship between Human capital cost and Structural Capital Costs on Return on Investment while Capital Employed Efficiency showed an insignificant effect on Return on Investment. Return on Assets is insignificantly affected by the three coefficient of intellectual capital costs. It was also established that Human Capital Efficiency is positive and significantly affected by Return on Equity, although Return on Equity is not significant with Structural Capital Efficiency and Capital Employed Efficiency. It was observed that return on investment and return on equity were more significantly affected by intellectual capital costs. To rank the effect of the relationship, Return on Equity ranks first judging from the F statistic and R squared, while Return on Investment ranks second from the criteria. It was therefore recommended that Human Capital Efficiency, Structural Capital Efficiency and Capital Employed Efficiency make up the intellectual capital which implies jointly that, intellectual capital has a positive and significant effects of on financial performance of listed commercial banks in Nigeria. Banks should invest vigorously in the development of their human capital as the key driver of firms’ performance. It is also expected that Management and stakeholders of the bank should provide the infrastructure needed to achieve a virile intellectual capital in the system and also do well to provide an enabling and conducive working environment for its employees and an attractive environment for its customers which are the reason they are in business.