Impact of Intellectual Capital on the Sustainable Financial Performance of Private Sector Banks in Pakistan

This study investigates the impact of Intellectual Capital on sustainable financial performance of private sector banks in Pakistan. Panel data from 19 private sector banks covering the period 2012-2021 were obtained from the Financial Statement Analysis (FSA) report publish by the State Bank of Pakistan. Capital employed, human capital, relational capital, and structural capital were used as independent variables, with firm size, financial leverage, and GDP included as control variables. Return on equity (ROE) and return on capital employed (ROCE) served as the dependent variables. Our findings revealed the capital employed efficiency (CEE), relational capital efficiency (RCE) and human capital efficiency (HCE) are positively and significantly related to the return on equity (ROE), whereas these variables also positively influence the return on capital employed (ROCE). The overall intellectual capital, as measured by the MVAIC, there is a positive and significant relationship with the ROCE and is positively associated with the ROE. These findings suggest that managers and policymakers should give greater attention to the components of intellectual capital, as they are key drivers of value creation and can strengthen banks’ sustainable financial performance.