Indonesian Banking Performance: Impact of Intellectual Capital Analysis

Abstract

The digital banking 4.0 era provides more innovative opportunities for Indonesian banks in providing services to customers as innovation plays a role in answering the rapidly growing competition but changes in consumer behavior require banks to adapt more to digital technology. Thus, this study has the main purpose to measure intellectual capital efficiency and to analyze its association with the return on assets and return of equity as a proxy for profitability and asset turnover as a proxy for the productivity of 24 Indonesian banks between 2016 and 2021. The adjusted value-added intellectual coefficient (A-VAIC) model has been used to measure the hidden value of the firms to make an impact in value creation. Our results show that A-VAIC and one of its components Capital Employed Efficiency (CEE) have significant relationship with ROA, ROE, and ATO. While HCE and INVCE are insignificant for all the financial performance measures.