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EFFECT OF INTELLECTUAL CAPITAL ON FINANCIAL PERFORMANCE OF

QUOTED DEPOSIT MONEY BANKS IN NIGERIA (2010-2015)

Article · April 2017

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 EFFECT OF INTELLECTUAL CAPITAL ON FINANCIAL
PERFORMANCE OF QUOTED DEPOSIT MONEY BANKS IN
NIGERIA (2010-2015)

Ogbodo Okenwa Cy, Ph.D.

Department of Accountancy, Nnamdi Azikiwe University, Awka

Amahalu Nestor Ndubuisi, Ph.D.

Department of Accountancy, Nnamdi Azikiwe University, Awka

&
Abiahu Mary-Fidelis Chidoziem, FCA
Department of Accountancy, Nnamdi Azikiwe University, Awka

ABSTRACT

The objective of this study is to determine the effect of intellectual capital on the
financial performance of quoted commercial banks in Nigeria. This study adopted
panel data analysis of all the banks quoted on the Nigerian Stock Exchange as at 31st
December 2015 for a period of six years (2010 – 2015). This allows for comparison
of the performance of intellectual capital indices among the firms considered in this
study. The population is made up of the 15 banks listed on the floor of the Nigerian
Stock Exchange as at 31st December, 2015. This study made use ex-post facto
research design. Data were gotten from secondary sources obtained from fact books,
annual reports and accounts of the selected quoted commercial banks in Nigeria as
at 31st December, 2015. The relevant data obtained were subjected to statistical
analysis using Pearson coefficient of correlation, ordinary least square regression,
heteroskedasticity test and Hausman test. The analysis of data was done using the
Value Added Intellectual Coefficient (VAIC) made to measure the efficiency of value
added of tangible and intangible assets used by a firm in its operation. The results of
this study revealed that there is a positive and statistically significant relationship
between Intellectual Capital and financial performance of deposit money banks in
Nigeria at 5% level of significance. The researcher recommends the recognition of
intellectual capital as an important business resource.

Keywords: Financial Performance, Intellectual Capital, Knowledge Asset, VAIC

Introduction economy according to Andriessen (2004)

In a knowledge based economy, the value
of products, services rendered and firms
are not only derived from tangible assets,
but mostly by assets based on all kinds of
knowledge – in other words, intangible
assets. The main characteristics of
knowledge based economy or intangible
114
114
are as follows:
(a) Knowledge replaces labour and capital
as fundamental resources in production
and intangible assets creates a
substantial part of the value added of
companies.
Journal of Global Accounting, Vol. 5 No. 1, April, 2017
(b) The concept of ownership of resources
has changed; knowledge resides in the
head of the employee. Knowledge is
the base of intellectual capital and
consequently of organizational
capabilities [Amiri, Jandghi, Hosvani
and Ramazan, 2010].
The present corporate performance
measurement system is heavily inclined
towards financial and physical aspects of
the company and thus lacks relevant
information regarding the performance of
the intangible assets or intellectual capital
efficiency [Rubina, 2011].
However, over the past decade, businesses
have recognized the importance of
managing their intangible assets and have
considered brand development, stakeholder
relations, reputation and organizational
culture as the most import resources of
sustainable business advantage [Masoud,
Ayyub & Mohammed, 2014]. The term
Intellectual Capital has gained widespread
interest in recent times and refers to the
resources available to the company that are
not shown explicitly in the Statement of
Financial Position. It is of an intangible
nature, hence making it quite cumbersome
to place a measurable value on it.
Intellectual Capital also refers to the
abilities of human brain or mind that create
value addition [Rubina, 2011]. The three
major types of intellectual capital include:
(1) Human capital which are all human
attributes available and of benefit to the
organization [Experience, exposure,
skill et cetera]
(2) Relational Capital which is the
organization's knowledge storage after
an employee leaves [Ross & Ross,
1997]. This includes culture, processes
database et cetera.
(3) Relational Capital that consists of the
relations between the organization and
115
external stakeholders [brands, customer
and stakeholder relations et cetera].
Few studies have been conducted to find
out the contribution of intellectual capital
on the financial performance of
organizations especially the commercial
banks. This is because the term
“intellectual capital’’ has just recently
gained wide-spread interest in Nigeria.
Much of the studies on intellectual capital
have focused on Western Countries [Ogbo,
Ezeobi & Ituma, 2013]. To date, few
scholars have focused on the effect of
intellectual capital on the financial
performance of commercial banks in
Nigeria. This is surprising given that many
scholars [e.g Ruta,2009,Yang & Lin,2009]
argue that intellectual capital development
is the hidden value that is not reflected in
organizational financial statements, but has
the potential to contribute to organizational
profitability and competitive advantage
[Ogbo, Ezeobi, & Ituma, 2013]
Organizations ignore intellectual capital
development because by merely looking at
the financial statements, the value is not
readily ascertained. However, this is wrong
as findings have noted that intellectual
capital is positively related to innovation.
Intellectual capital involves the intentional
introduction and application within an
organization of ideas, processes, products
or procedures new to the unit of adoption,
designed to significantly benefit the
organization or the wider society. [West &
Farr, 1990]. These ideas and processes add
value to the organization and thus improve
their financial performance. Wealth cannot
be created until profits are generated from
innovations (Waheed & Arshad, 2014).
Therefore, there is need to identify the
Effect of intellectual capital on the
financial performance of commercial
banks in Nigeria.
 Effect of Intellectual Capital on Financial Performance of Quoted Deposit Money Banks …
Following from the above, the broad
objective of this study is to empirically
investigate the effect of intellectual capital
(proxy by CEE, HCE and SCE) on the
financial performance (proxy by Return on
Asset {ROA}) of quoted commercial
banks in Nigeria. In specific terms, the
study seeks:
1. To determine the effect of Capital
Employed Efficiency [CEE] on the
ROA of quoted deposit money banks in
Nigeria
2. To determine the effect of Human
Capital efficiency [HCE] on ROA of
quoted deposit money banks in
Nigeria.
3. To determine the effect of Structural
Capital Efficiency [SCE] on ROA of
quoted deposit money banks in
Nigeria.
For the purpose of this study, the Value
Added Intellectual Coefficient [VAIC]
which was developed by Pulic [1998] will
be adopted for the measurement of
intellectual capital. VAIC is derived from
the summation of its three components:
(1) Capital Employed Efficiency [CEE] (2)
Human Capital Efficiency [HCE] and
(3) Structural Capital Efficiency [SCE]
Research Hypotheses
The following null hypotheses were
tested:
Ho1: Capital Employed Efficiency [CEE]
has no significant effect on ROA of
quoted deposit money banks in
Nigeria
H02: Human Capital Efficiency [HCE] has
no significant effect on ROA of
quoted deposit money banks in
Nigeria
H03: Structural Capital Efficiency [SCE]
has no significant effect on ROA of
quoted deposit money banks in
Nigeria
221
116
Concept of intellectual capital (IC)
Pulic [2004] defines IC as all employees
and organizations ability to create value
under a market assessment. Lonnqvist and
Mettanen [2011] describes it as non-
material sources of creating a companys’
value based on the employees capabilities,
organizations resources, the way of
operating and relations with the
shareholders. The European commission as
quoted by Corcoles and Ponce [2013] says
that Intellectual Capital (IC) allows an
organization to transform a set of material,
financial and human resources in a system
capable of creating value for stakeholders.
Berzkalne and Zelgalve [2014] cited
Frykan and Tolleryd [2010] who were of
the opinion that IC includes all non-
financial assets of a company that
are not reflected in the balance sheet.
Chizari, Mehrjard, Sadrabadi and Mehrjadi
(2016) defined IC as the set of all
knowledge which has been possessed by
the employees and the company and
creates a competitive advantage. Thus, it
can be deduced that IC are the unique
abilities of the human mind that adds value
to a company and enables it maintain a
competitive advantage.
Signaling Theory
The signaling theory assumes that
managers are better informed than
shareholders and others concerning the
firms' position and given this reason may
choose to disclose information in an
attempt to signal to the public regarding
the firms' position. More profitable firms
will disclose more information to inform
their stakeholders about their good
performance are more likely to disclose
more information regarding the intellectual
capital as compared to firms with bad
performance [Neysi, Mazraeh &
Mousavi,2012]. Signaling theory is
concerned with how to address problems
arising from information asymmetry in any
social setting. It suggests that the
Journal of Global Accounting, Vol. 5 No. 1, April, 2017

information asymmetry should be reduced Skye Bank Plc, Stanbic IBTC Bank Plc,
if the party possessing more information Sterling Bank Plc, Union Bank Plc, United
can send signals to other interest related Bank for Africa Plc, Unity Bank Plc,
parties (Kamath, 2014). Based on this Wema Plc and Zenith International Bank
theory annual reporting disclosure [of Plc. Thus, the 15 quoted banks will be
intellectual capital] of company is represents the sample size for this study.
important information because it affects
investors decision making process [Dewi, Tests of Hypotheses And Analysis of
Young & Sundari, 2014]. This study is Data
anchored on signaling theory. The following models specification was
used to test the research hypotheses:
Methodology ROAit = β0 + β1CEEit + β2PCit + β3DERit
For the purpose of this study, an ex-post + µίt - - - - Ho1
ROAit = β0 + β1HCEit + β2PCit + β3DERit
factor research design was adopted to test + µίt - - - - Ho2
how independent variables (Human Capital ROAit = β0 + β1SCEit + β2PCit + β3DERit
Efficiency, Structure Capital Efficiency + µίt - - - - Ho3
and Capital Employed Efficiency) affect
profitability (ROA). Test of Null Hypothesis 1
Ho1: Capital Employed Efficiency (CEE)
Population of the study has no significant effect on Return on
The population of the study consists of 15 Asset (ROA) of quoted banks in
commercial banks listed in the Nigerian Nigeria
Stock Exchange. They include: Access
Bank Plc, Diamond Bank Plc, ECO Bank Model Specification:
Plc, FCMB Bank Plc, Fidelity Bank Plc, ROAit = β0 + β1CEEit + β2PCit + β3DERit
First Bank Plc, Guaranty Trust Bank Plc, + µίt - - - - Ho1

Table 1: OLS Regression Analysis showing the relationship between ROA and CEE, PC,
DER in Banking Industry
. regress roa cee pc der
Source | SS df MS Number of obs = 90
-------------+------------------------------ F( 3, 86) = 73.18
Model | 1.89967971 3 .63322657 Prob > F = 0.0000
Residual | .744125838 86 .008652626 R-squared = 0.7185
-------------+------------------------------ Adj R-squared = 0.7087
Total | 2.64380555 89 .02970568 Root MSE = .09302
------------------------------------------------------------------------------
roa | Coef. Std. Err. t P>|t| [95% Conf. Interval]
-------------+----------------------------------------------------------------
cee | -.0000138 1.81e-06 -7.65 0.000 -.0000174 -.0000102
pc | .1471545 .0145034 10.15 0.000 .1183228 .1759863
der | 5.09e-06 .0000113 0.45 0.652 -.0000173 .0000275
_cons | .297645 .0356945 8.34 0.000 .2266867 .3686032
------------------------------------------------------------------------------
Source: Researcher’s computation using STATA 13, 2016

117
 Effect of Intellectual Capital on Financial Performance of Quoted Deposit Money Banks …

Interpretation of Regressed Result The implication is that for there to be a

The regressed coefficient correlation unit/one naira increase in ROA, there
result in table 1 shows the existence of a must be.0000138 multiplying effect
negative relationship between ROA and decrease of CEE.
CEE (β1=-.0000138), a positive
relationship with PC (β2= .1471545) and Decision Rule:
DER (β3=5.09e-06). The probability Reject Ho if the P-value of the test is less
values for the slope of coefficient shows than α-value (level of significance) at
that P(x1=0.000<0.05; x2=0.000<0.05; 5%, otherwise accept H1.
x3=0.652>0.05). This implies that CEE
and PC have a statistically significant Decision:
relationship with ROA at 1% The P-value of the test (Prob > F =
significance level while DER is 0.0000) is less than 0.05. In view of the
statistically insignificant with ROA. The rule of thumb, H1 will be accepted and
coefficient of determination obtained is H0 rejected.
0.72 (72%), which is commonly referred
to as the R2. The cumulative test of Conclusion:
hypothesis using R2 to draw statistical It would be concluded that CEE has a
inference about the explanatory variables statistically significant effect on ROA of
employed in this regression equation, Banks quoted on the floor on Nigerian
shows that R-Squared value shows that Stock Exchange at 5% level of
72% of the systematic variations in the significance.
dependent variable can be jointly
predicted by all the independent Test of Null Hypothesis II
variables. 28% was explained by Ho2: Human Capital Efficiency has no
unknown variables that were not significant effect on Return on Asset
included in the model. The overall (ROA) of quoted banks in Nigeria
significance of the model (F-
statistic=0.0000) is statistically Model Specification:
significant at 5%. ROAit = β0 + β1HCEit + β2PCit +
β3DERit + µίt - - - -
Model Specification: Ho2
ROA = .297645 -.0000138CEE
Table 2: OLS Regression Analysis showing the relationship between ROA and HCE, PC, DER in
Banking Industry.
. regress roa hce pc der
Source | SS df MS Number of obs = 90
-------------+------------------------------ F( 3, 86) = 35.25
Model | 1.45804175 3 .486013916 Prob > F = 0.0000
Residual | 1.1857638 86 .013787951 R-squared = 0.5515
-------------+------------------------------ Adj R-squared = 0.5358
Total | 2.64380555 89 .02970568 Root MSE = .11742
------------------------------------------------------------------------------

roa | Coef. Std. Err. t P>|t| [95% Conf. Interval]

-------------+----------------------------------------------------------------
hce | .0049798 .0022937 2.17 0.033 .0004201 .0095396
pc | .179437 .0176665 10.16 0.000 .1443171 .2145568
der | 5.37e-06 .0000142 0.38 0.007 -.0000229 .0000336
_cons | .0232105 .0191364 1.21 0.228 -.0148314 .0612524
------------------------------------------------------------------------------
Source: Researcher’s computation using STATA 13, 2016
219
118
 Effect of Intellectual Capital on Financial Performance of Quoted Deposit Money Banks …

Interpretation of Regressed Result Decision Rule:

The regressed coefficient correlation result Reject Ho if the P-value of the test is less
in table 2 shows the existence of a positive than 0.05, otherwise accept H1.
relationship between ROA and the
independent/explanatory variables (HCE, Decision:
PC, DER) at a statistically significant level The P-value of the test ( Prob > F =
of 5%, 5% and 5% significance levels 0.0000) is less than the critical value 0.05.
respectively. The coefficient of In view of the rule of thumb, H1 will be
determination obtained is 0.55 (55%), accepted and H0 rejected.
which is commonly referred to as the R2.
The cumulative test of hypothesis using R2 Conclusion:
to draw statistical inference about the It would be concluded that HCE has a
explanatory variables employed in this positive statistically significant effect on
regression equation, shows that R-Squared ROA of banks quoted on the floor of
value shows that 55% of the systematic Nigerian Stock Exchange at 5% level of
variations in the dependent variable can be significance.
jointly predicted by all the independent
variables. 45% was explained by unknown Test of Null Hypothesis III
variables that were not included in the Ho3: Structural Capital Efficiency has no
model. The overall significance of the significant effect on Return on Asset
model (F-statistic=0.0000) is statistically (ROA) of quoted banks in Nigeria.
significant at 5%.
Model Specification:
Model Specification: ROAit = β0 + β1SCEit + β2PCit +
ROA = .0232105 + .0049798HCE β3DERit + µίt - - - - Ho3
The implication is that for there to be a
unit/one naira increase in ROA, there must
be 0.0232105 multiplying effect of HCE.
Table 3: OLS Regression Analysis showing the relationship between ROA and SCE, PC, DER
in Banking Industry
. regress roa sce pc der
Source | SS df MS Number of obs = 90
-------------+------------------------------ F( 3, 86) = 42.50
Model | 1.57879137 3 .526263789 Prob > F = 0.0000
Residual | 1.06501418 86 .012383886 R-squared = 0.5972
-------------+------------------------------ Adj R-squared = 0.5831
Total | 2.64380555 89 .02970568 Root MSE = .11128
------------------------------------------------------------------------------
roa | Coef. Std. Err. t P>|t| [95% Conf. Interval]
-------------+----------------------------------------------------------------
sce | .0837426 .0216232 3.87 0.000 -.1267282 -.040757
pc | .1761371 .0167117 10.54 0.000 .1429154 .2093588
der | 9.87e-06 .0000135 0.73 0.006 -.000017 .0000367
_cons | .0905851 .0198565 4.56 0.000 .0511116 .1300586
------------------------------------------------------------------------------
Source: Researcher’s computation using STATA 13, 2016

Interpretation of Regressed Resulst probability values of the slope of

The regressed coefficient correlation result
in table 3 shows the existence of a positive
relationship between SCE (β1=.0837426);
PC (β2=.1761371); DER (β3=9.87e-06). The
219
119
coefficient obtained is P(x1=0.000<0.05);
P(x2=0.000<0.05); P(x3=0.06<0.05). The
implication of this result is that the
explanatory/independent variables (SCE,
Journal of Global Accounting, Vol. 5 No. 1, April, 2017

PC, DER) associate positively with ROA
at a statistically significant level at 5%.
The coefficient of determination obtained
is 0.60 (60%), which is commonly referred
to as the R2. The cumulative test of
hypothesis using R2 to draw statistical
inference about the explanatory variables
employed in this regression equation,
shows that R-Squared value shows that
60% of the systematic variations in the
dependant variable can be jointly predicted
by all the independent variables, while
40% was explained by unknown variables
that were not included in the model. The
overall significance of the model (F-
statistic=0.0000) is statistically significant
at 5%.
Model Specification:
ROA = .0905851 + .0837426SCE
The implication is that for there to be a
unit/one naira increase in ROA, there must
be .0837426 multiplying effect of SCE.
Decision Rule:
Reject Ho if the P-value of the test is less
than 0.05, otherwise accept H1.
Decision:
The P-value of the test (Prob > F = 0.0000)
is less than the critical P-value of 0.05. In
view of the rule of thumb, H1 will be
accepted and H0 rejected.
Conclusion:
It would be concluded that SCE has a
positive and statistically significant of
Banks quoted on the floor of Nigerian
stock exchange at 5% level of significance.

Table 4: Regression Analysis showing Breusch-Pagan / Cook-Weisberg test for

heteroskedasticity between CEE, PC, DER and ROA of banks in Nigeria
. regress roa cee pc der
Source | SS df MS Number of obs = 90
-------------+------------------------------ F( 3, 86) = 73.18
Model | 1.89967971 3 .63322657 Prob > F = 0.0000
Residual | .744125838 86 .008652626 R-squared = 0.7185
-------------+------------------------------ Adj R-squared = 0.7087
Total | 2.64380555 89 .02970568 Root MSE = .09302
------------------------------------------------------------------------------
roa | Coef. Std. Err. t P>|t| [95% Conf. Interval]
-------------+----------------------------------------------------------------
cee | -.0000138 1.81e-06 -7.65 0.000 -.0000174 -.0000102
pc | .1471545 .0145034 10.15 0.000 .1183228 .1759863
der | 5.09e-06 .0000113 0.45 0.652 -.0000173 .0000275
_cons | .297645 .0356945 8.34 0.000 .2266867 .3686032
------------------------------------------------------------------------------
. estat hettest
Breusch-Pagan / Cook-Weisberg test for Interpretation of Post Regressed
heteroskedasticity Result
Ho: Constant variance Heteroskedasticity test is used to show
Variables: fitted values of roa the degree of homogeneity of companies
chi2(1) = 33.22 or variables used in a study.
Prob > chi2 = 0.0000
Table 4 indicates that the p-value (prob >
Source: Researcher’s computation using chi2) of 0.0000 is less than the critical
STATA 13, 2016
120
Journal of Global Accounting, Vol. 5 No. 1, April, 2017

value of 5%. Therefore, H1 will be Hence CEE has a statistically significant

accepted and HO rejected. effect on ROA of banks quoted on the
floor of the Nigerian Stock Exchange at
5% level of significance.

Table 5: Regression Analysis showing Breusch-Pagan / Cook-Weisberg test for

heteroskedasticity between HCE, PC, DER and ROA of banks in Nigeria
. regress roa hce pc der
Source | SS df MS Number of obs = 90
-------------+-------------- ---------------- F( 3, 86) = 35.25
Model | 1.45804175 3 .486013916 Prob > F = 0.0000
Residual | 1.1857638 86 .013787951 R-squared = 0.5515
-------------+------------------------------ Adj R-squared = 0.5358
Total | 2.64380555 89 .02970568 Root MSE = .11742
------------------------------------------------------------------------------
roa | Coef. Std. Err. t P>|t| [95% Conf. Interval]
-------------+----------------------------------------------------------------
hce | .0049798 .0022937 2.17 0.033 .0004201 .0095396
pc | .179437 .0176665 10.16 0.000 .1443171 .2145568
der | 5.37e-06 .0000142 0.38 0.007 -.0000229 .0000336
_cons | .0232105 .0191364 1.21 0.228 -.0148314 .0612524
------------------------------------------------------------------------------
. estat hettest
Breusch-Pagan / Cook-Weisberg test for heteroskedasticity
Ho: Constant variance
Variables: fitted values of roa
chi2(1) = 12.49
Prob > chi2 = 0.0004
Source: Researcher’s computation using STATA 13, 2016

Interpretation of Post Regressed Result

Since table 5 indicates that the p-value Hence HCE has a positive and statistically
(prob > chi2) of 0.0004 is less than the significant effect on banks quoted on the
critical value of 5%. Therefore, H1 will be floor of the Nigerian Stock Exchange at
accepted and HO rejected. 5% significance level.

Table 6: Regression Analysis showing Breusch-Pagan / Cook-Weisberg test for

heteroskedasticity between SCE, PC, DER and ROA of banks in Nigeria
. regress roa sce pc der
Source | SS df MS Number of obs = 90
-------------+------------------------------ F( 3, 86) = 42.50
Model | 1.57879137 3 .526263789 Prob > F = 0.0000
Residual | 1.06501418 86 .012383886 R-squared = 0.5972
-------------+------------------------------ Adj R-squared = 0.5831
Total | 2.64380555 89 .02970568 Root MSE = .11128
------------------------------------------------------------------------------
roa | Coef. Std. Err. t P>|t| [95% Conf. Interval]
-------------+----------------------------------------------------------------
121
Journal of Global Accounting, Vol. 5 No. 1, April, 2017

sce | .0837426 .0216232 3.87 0.000 -.1267282 -.040757

pc | .1761371 .0167117 10.54 0.000 .1429154 .2093588
der | 9.87e-06 .0000135 0.73 0.006 -.000017 .0000367
_cons | .0905851 .0198565 4.56 0.000 .0511116 .1300586
------------------------------------------------------------------------------
. estat hettest
Breusch-Pagan / Cook-Weisberg test for heteroskedasticity
Ho: Constant variance
Variables: fitted values of roa
chi2(1) = 15.09
Prob > chi2 = 0.0002
Source: Researcher’s computation using STATA 13, 2016

Interpretation of Post Regressed Result

Table 6 indicates that the p-value (prob > Hence SCE has a positive and statistically
chi2) of 0.0002 is less than the critical significant effect on banks quoted on the
value of 5%. Therefore, H1 will be floor of the Nigerian Stock Exchange at
accepted and HO rejected. 5% significance level.

TABLE 7: Hausman specification between Fixed effect model and Random effect
model for CEE, PC DER on DPS
. hausman FE RE
---- Coefficients ----
| (b) (B) (b-B) sqrt(diag(V_b-V_B))
| FE RE Difference S.E.
-------------+----------------------------------------------------------------
cee | -.0000142 -.0000141 -1.59e-07 6.32e-07
pc | .135811 .1400018 -.0041908 .0032248
der | 2.66e-06 3.49e-06 -8.27e-07 4.20e-06
------------------------------------------------------------------------------
b = consistent under Ho and Ha; obtained from xtreg
B = inconsistent under Ha, efficient under Ho; obtained from xtreg

Test: Ho: difference in coefficients not systematic

chi2(3) = (b-B)'[(V_b-V_B)^(-1)](b-B)
= 12.20
Prob>chi2 = 0.0315

Source: Researcher’s computation using STATA 13, 2016

Table 7 reveals that that P-value has a positive and statistically significant
(Prob>chi2) = 0.0315 is less than the effect on ROA of banks quoted on the
critical value of 5%. Thus, H1 will be floor of Nigerian Stock Exchange at 5%.
accepted and Ho rejected. Invariably, CEE

122
Journal of Global Accounting, Vol. 5 No. 1, April, 2017

TABLE 8: Hausman specification between Fixed effect model and Random effect
model for HCE, PC DER on ROA
. hausman FE RE
---- Coefficients ----
| (b) (B) (b-B) sqrt(diag(V_b-V_B))
| FE RE Difference S.E.
-------------+----------------------------------------------------------------
hce | -.0064285 .0047122 -.0111406 .0028393
pc | .1501134 .1790626 -.0289492 .0078419
der | 5.63e-07 5.03e-06 -4.47e-06 6.10e-06
------------------------------------------------------------------------------
b = consistent under Ho and Ha; obtained from xtreg
B = inconsistent under Ha, efficient under Ho; obtained from xtreg

Test: Ho: difference in coefficients not systematic

chi2(3) = (b-B)'[(V_b-V_B)^(-1)](b-B)
= 15.95
Prob>chi2 = 0.0012
(V_b-V_B is not positive definite)
Source: Researcher’s computation using STATA 13, 2016.

Table 8 reveals that that P-value Invariably, HCE has a statistically

(Prob>chi2) = 0.0012 is less than 5%. significant effect on ROA of banks quoted
Thus, H1 will be accepted and Ho rejected. on the floor of Nigerian Stock Exchange
5% significance level.

TABLE 9: Hausman specification between Fixed effect model and Random effect
model for SCE, PC DER on ROA
. hausman FE RE
---- Coefficients ----
| (b) (B) (b-B) sqrt(diag(V_b-V_B))
| FE RE Difference S.E.
-------------+----------------------------------------------------------------
sce | .1093646 .1001903 -.0091743 .0028637
pc | .1601463 .165585 -.0054387 .0013879
der | 1.17e-06 4.44e-06 -3.27e-06 3.67e-06
------------------------------------------------------------------------------

b = consistent under Ho and Ha; obtained from xtreg

B = inconsistent under Ha, efficient under Ho; obtained from xtreg
Test: Ho: difference in coefficients not systematic
chi2(3) = (b-B)'[(V_b-V_B)^(-1)](b-B)
= 10.16
Prob>chi2 = 0.0173
(V_b-V_B is not positive definite)

Source: Researcher’s computation using STATA 13, 2016

123
 Effect of Intellectual Capital on Financial Performance of Quoted Deposit Money Banks …
Table 9 reveals that that P-value
(Prob>chi2) = 0.0173 is less than the
critical value of 5%. Thus, H1 will be
accepted and Ho rejected. Invariably, SCE
Findings, Conclusion and
Recommendations
Summary of Findings
The findings of the study are as follows:
1) Table 4 shows that Prob>chi2 =
0.0000<0.05, which was confirmed by
fixed effect model in table 7 to be
Prob>chi2 = 0.0315<0.05. It was
therefore found that Intellectual Capital
(proxy by CEE) has a positive and
statistically significant effect on ROA
of banks quoted on the floor of
Nigerian Stock Exchange at 5% level
of significance.
2) Table 5 indicates that Prob>chi2 =
0.0004 <0.05 as was confirmed in
hausman specification test with fixed
effect model in table 8; Prob>chi2 =
0.0012<0.05.Therefore, it would be
concluded that Intellectual Capital
(proxy by HCE) has a positive and
statistically significant effect on ROA
of banks quoted on the floor of
Nigerian Stock Exchange at 5% level
of significance.
3) Table 6 reveals that Prob>chi2 = 0.0002
and was confirmed in hausman
specification test with fixed effect
model in table 9; Prob>chi2 =
0.0173<0.05. Therefore it was deduced
intellectual capital (proxy by SCE) has
a positive and statistically significant
effect on ROA of banks quoted on the
floor of Nigerian Stock Exchange at
5% level of significance.
Recommendations
1. Inclusion of Human Capital
Accounting in the Financial
Reporting of Nigeria Service Firms:
1. Major financial regulatory bodies such
as International Accounting Standard
Board, Central Bank of Nigeria,
Financial Reporting Council of
219
124
has a statistically significant effect on
ROA of banks quoted on the floor of
Nigerian Stock Exchange at 5% level of
significance.
Nigeria, Nigeria Stock Exchange,
Stock Exchange Commission et cetera
should encourage the inclusion of
human capital accounting in the
financial reporting of Nigeria
services firms.
2. Creation of Standards
Standards should be created for human
resources identification and
measurement. This will enhance
valuation of human capital, ensure a
higher degree of utility to stakeholders,
uniformity in disclosures and will show
a reliable comparison of human capital
values.
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