The Effect of Intellectual Capital Efficiency on Financial Performance: The Case of Commercial Bank of Ethiopia

The purpose of this research was to look at the effect of intellectual capital efficiency on financial performance at Ethiopia's government-owned commercial bank. In a quantitative research approach, the study used an explanatory research design. The study was conducted using audited financial statements of government-owned commercial banks for the years 2005 to 2020. The study's main findings revealed that bank size, capital employed efficiency, human capital employed efficiency, structural capital efficiency, value added intellectual capital efficiency coefficient, and inflation variables all have a significant impact on Ethiopia's government-owned commercial bank's financial performance. Furthermore, three variables (inflation, human capital employed, and bank size) had a negative relationship with return on asset (ROA), whereas the remaining three variables (capital employed efficiency, structural capital efficiency, and value added intellectual capital) had a positive relationship with Ethiopian commercial bank financial performance. The inflation rate had a negative substantial effect on return on asset (ROA) of Ethiopia's government-owned commercial bank, whereas the gross domestic product had a positive but negligible effect. The government commercial bank of Ethiopia sector still operates based on the traditional resources such as financial and physical capital to make a profit, bank managers should focus on how to use and manage its financial and physical resources effectively to reach a higher level of profitability.