The Role of Knowledge Assets in Boosting Bank Performance: Evidence from Bangladesh

Using data from 29 listed banking companies in Bangladesh over a five-year period, this study investigates the relationship between intellectual capital (IC) and firm performance, with a particular emphasis on return on equity (ROE). Pooled OLS, Random Effects, and Fixed Effects models are used in the analysis, which uses panel data regression with 232 firm-year observations. The Random Effects model is found to be the most suitable by the Hausman specification tests and the Breusch-Pagan Lagrange Multiplier. The results show that whereas human capital efficiency (HCE) and capital employed efficiency (CEE) have a positive and substantial impact on profitability, structural capital efficiency (SCE) has a negative and statistically significant effect on ROE. While the COVID-19 epidemic has a negative impact and firm age only marginally affects ROE, firm size is found to increase ROE. According to the models' explanatory power, between 59% and 72% of differences in ROE may be explained by intellectual capital and control variables. These findings imply that while inefficiencies in structural capital may impair performance, human and physical capital are crucial for increasing profitability. The report adds to the scant data on IC in emerging nations and provides managers and policymakers with insightful information about how to allocate resources and plan strategically.