Intellectual Capital and Technical Efficiency in Indian Banks: An Empirical Note

Abstract

Purpose – This study examines the relationship between intellectual capital and Technical Efficiency of Indian banks.

Design/methodology/approach – Firstly, we estimate Data Envelopment Analysis (DEA) – based technical efficiency of 65 scheduled commercial banks during 2004 – 05 to 2022 – 23 and subsequently compute their annual intellectual capital using the Value-Added Intellectual Capital framework. Finally, we estimate the linkage between intellectual capital and efficiency using panel Tobit model.

Findings: Our findings indicate that average technical, pure technical and scale efficiency scores under operating approach are slightly higher than those under intermediation approach for the aggregate sample during study period. Secondly, we also find that aggregate intellectual capital is exerts positive and statistically significant impact on technical, pure technical and scale efficiency when estimated under operating approach whereas no such relationship is confirmed under intermediation approach. Among intellectual capital constituents, human capital is found to be most critical factor impacting all three efficiency parameters and followed by structural capital. Thus, banks should harness intellectual capital to further augment their efficiency.