Intellectual Capital And Profitability Ratios Of Foreign Banks Operating In India: A Structural Equation Model Approach

Abstract

The aim of the study is to measure the impact of intellectual capital on the profitability ratios in respect of the foreign banks in India. Twenty seven foreign banks were studied and analyzed by using Modified Value Added Intellectual Coefficient (MVAIC) method and Structural Equation Method (SEM). It is found that all the components of intellectual capital indicators have their impact positively on the banks’ profitability ratios. The foreign banks need to focus mainly on the Human Capital Efficiency and Relational Capital Efficiency. It is found that the four efficiencies (HCE, RCE, SCE and CEE) influenced the profitability ratios of foreign banking sector operating in India.