Ranking Bank Performances using VAICTM Model

Abstract

This study is aimed to examine the intellectual capital performance of Ethiopian conventional banks. It also aimed to examine the performance relationship among various constituents of IC. In this research, the value-added intellectual coefficient (VAIC^TM) ranking was used to determine the intellectual capital performance of banks. The required data was obtained from published annual reports of commercial banks and the National Bank of Ethiopia. Comparison was made between VAIC and traditional performance rankings. The study reveals that VAIC has a significant relation with human costs in the value addition. The research reveals a relatively higher human capital efficiency compared to capital employed efficiency or structural capital efficiency. The size of banks in terms of total assets and total shareholders’ equity has little or no impact on the intellectual capital performance of banks. These findings may serve as useful input for bankers to apply knowledge management in their institutions so as to maximize value creation. Further, the outcome can be used as a performance benchmark for banks. Last but not least, the result of this study provides information to stakeholders and potential investors about the value-creation capabilities of banks.