Proceedings of the 3rd European Conference on Intellectual Capital

Magdi El-Bannany
Based on this argument we can say that <strong>the</strong> need for more intellectual skills to deal with this issue will
be higher for <strong>the</strong> newly listed companies, which are seeking for external funds ra<strong>the</strong>r than eldest listed
ones
Listing status is measured by using a dummy variable equal to 1 if <strong>the</strong> firm is listed in Dubai Financial
Market and 0 if not in each year <strong>of</strong> <strong>the</strong> study period.
Based on <strong>the</strong> above argument, <strong>the</strong> third hypo<strong>the</strong>sis is;
H3: <strong>the</strong>re is a negative relationship between <strong>the</strong> listing age <strong>of</strong> <strong>the</strong> bank and intellectual capital
performance.
3.1.4 Inflation
Inflation can be linked to cash and real income concept ‘which in economics context’ means when
counting for intellectual capital performance <strong>the</strong> results do not reflect <strong>the</strong> real figures because <strong>the</strong>se
are inflated by <strong>the</strong> increases in <strong>the</strong> prices and not in <strong>the</strong> productivity <strong>of</strong> <strong>the</strong> human capital represented
by increasing in <strong>the</strong> level <strong>of</strong> products and services as a result <strong>of</strong> <strong>the</strong> intellectual work.
Based on <strong>the</strong> above argument, <strong>the</strong> fourth hypo<strong>the</strong>sis is;
H4: <strong>the</strong>re is a positive relationship between <strong>the</strong> inflation rate and intellectual capital performance.
3.1.5 Foreign ownership
As a business culture factor, <strong>the</strong> existence <strong>of</strong> foreign ownership might represent a pressure on <strong>the</strong>
management <strong>of</strong> <strong>the</strong> company and lead to recruiting highly intellectual staff which in turn should result
in better human capital performance in <strong>the</strong> process <strong>of</strong> creating wealth and hence attract more foreign
investors to invest in <strong>the</strong>se companies.
Therefore, <strong>the</strong> fifth hypo<strong>the</strong>sis is;
H5: <strong>the</strong>re is a positive relationship between foreign ownership and intellectual capital performance.
3.1.6 Bank risk
Patton and Zelenka (1997, p.611) stated that “<strong>the</strong> percentage <strong>of</strong> intangible assets is a proxy for <strong>the</strong>
extent to which a firm’s future performance depends on risky assets”.
El-Bannany (2008, p.493) argued that increasing <strong>the</strong> percentage <strong>of</strong> intangible assets might give <strong>the</strong>
impression to <strong>the</strong> human capital (as intangible assets) that <strong>the</strong>y are important in contributing to <strong>the</strong>
success <strong>of</strong> <strong>the</strong> company and motivate <strong>the</strong>m to continue in innovating e.g. new products or services or
improving business processes to achieve more benefit to <strong>the</strong> company.
Because banking industry is facing different type <strong>of</strong> risks such as credit, liquidity and interest rate
risks, using total reserves as a comprehensive bank risks variable can be seen better than o<strong>the</strong>rs in
representing <strong>the</strong> level <strong>of</strong> bank i in year t.
Based on <strong>the</strong> above argument, <strong>the</strong> sixth hypo<strong>the</strong>sis is;
H6: <strong>the</strong>re is a positive relationship between bank risk and intellectual capital
performance.
3.1.7 Bank size
Bank size can be linked to investment portfolio <strong>the</strong>ory and considered as a proxy for bank risk which
means that bigger sizes banks are more diversify than smaller ones and hence smaller banks are
riskier than bigger ones and in turn <strong>the</strong> level <strong>of</strong> intellectual work need to face <strong>the</strong> risky situation should
be higher for smaller banks in comparison to bigger ones.
Several measures have been used in <strong>the</strong> banking literature to represent company size such as total
assets, annual sales, market capitalisation, and number <strong>of</strong> employees. As argued by El-Bannany
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