The Mediating Role of Intellectual Capital in the Impact of Governance on the Financial Performance of Commercial Banks: "An Applied Study on GCC Countries"

Abstract

This study aims to examine the impact of governance on financial performance, considering the mediating role of intellectual capital. To achieve this objective, Structural Equation Modeling (SEM) techniques were employed using Smart-PLS 4 software, based on annual data from a sample of 17 commercial banks covering the period from 2011 to 2020. The governance variable (independent variable) was represented by indicators such as the number of board meetings, board independence, and the number of committees, the number of committee meetings, the number of governance committee members, and the number of governance committee meetings. Conversely, the financial performance variable (dependent variable) was represented by Return on Average Assets (ROAA), Return on Average Equity (ROAE), and Net Interest Margin (NIM). Intellectual capital (mediating variable) was represented by the Human Capital Efficiency Index and the Employed Capital Efficiency Index. The study results revealed a statistically significant direct impact of governance on the financial performance of banks and on intellectual capital within commercial banks. Additionally, a statistically significant direct impact of intellectual capital levels on bank financial performance was found, as well as a statistically significant impact of governance on the financial performance of commercial banks with intellectual capital acting as a mediating variable. The results also indicate that intellectual capital plays a significant role specifically, a complementary partial mediation effect in the relationship between governance and financial performance of commercial banks.