The Effects of Intellectual Capital on Dynamic Network Bank Performance

Data envelopment analysis (DEA) has recently become fashionable in measuring bank performance. In this study, we extend prior studies by using dynamic network-DEA (DN-DEA) to investigate the efficiency of 24 banks in Taiwan over the period of 2009 to 2012. Incorporating a risk measure as an exogenous input in the second divisional process, we find that the mean overall efficiency of the banks is 0.912, which is contributed by the resource-utilization and investment efficiencies. In addition, we investigate the association between intellectual capital (IC) and efficiency. Using the truncated regression technique with a bootstrapping approach, we find a strong relationship between the two variables, consistent with prior literature. While considering the dynamic divisional performance of banks, we have demonstrated that investments in IC will bring about better future economic benefits to banks.