Implications of Intellectual Capital Investment on Financial Performance of Nigerian Banks

The Nigerian banking sector face challenges in effectively managing and leveraging their intellectual capital. Hence, the rate of financial distress in the sector has become so worrisome that a good number of banks have collapsed in a short period, and their licenses have been revoked by the Central Bank of Nigeria. The study investigated the implications of intellectual capital investment on financial performance of Nigerian banks. The objectives were to determine the impact of human capital efficiency (HCE), structural capital efficiency (SCE), and relational capital efficiency (RCE) on return on total assets (ROTA), return on shareholders' equity (ROSE), and earnings per share (EPS) of Nigerian banks. Employing an ex-post facto research design, data were extracted from a cross-section of 12banks from 15years of audited annual reports. Using an econometric view to engage the ordinary least squares based balanced panel data regression technique in a longitudinal data framework of 180 observations, the results proved that HCE and SCE have a positive and significant impact on ROA, ROSE and EPS while RCE has a positive and insignificant impact on EPS and a negative and insignificant impact on ROTA and ROSE and hence concluded that intellectual capital investment has a significant impact on financial performance of Nigerian banks. The study recommended, among others, that banks should fit into place more on the training, development and enhancing the skills of its employees, and equally keep on investing in its structures (database structures, manuals, training materials, etc.) as it positively impacts the employees' performances and service delivery, hence achieving a competitive advantage and boosting their financial performance indicators.