The Impact of Intellectual Capital on Financial Performance at the Jordanian Commercial Banks in Accordance with the Public Model: An Applied Study

Abstract

Intellectual capital is considered a relatively modern concept that is receiving an increasing attention and importance، especially in terms of its meaning and mechanism of measurement. Intellectual capital is a dynamic concept as it constantly evolves and changes in accordance with the surrounding environment. Many companies، including banks، face challenges when they need to measure and evaluate their intellectual capital، especially those that rely on quantitative indicators for measurement، such as costs، profits، sales، market share، physical assets and financial obligations. The importance of measurement is heightened when a merger or an acquisition process is involved. This is due to the fact that accurate intellectual capital measurements will determine the value of the new shares of the new owners of the companies. Thus، the study objectives revolved around analyzing the impact of intellectual capital on financial performance in the Jordanian commercial banks in accordance with the Public model. The study followed the descriptive analytical approach. The sample consisted of all 13 Jordanian commercial banks listed in the Amman Stock Exchange for the period 2009-2014. The most important results of the study were as follows; there was a positive correlation between intellectual capital and financial performance represented by the return on assets، the return on the rights of the property and the return on the shares of the Jordanian banks. The Study concluded important recommendations such as the need for increasing the focus on intellectual capital and its management as any other cash assets in the banks، due to its importance as a compass for the bank’s strategy. This requires banks to investigate and explore their potential capacities to activate them. Moreover، banks need to establish a department that ensures the investment of their intellectual capital.