Proceedings of the 3rd European Conference on Intellectual Capital

Magdi El-Bannany
ownership; bank risk measured by bank risk measured by total reserves as a comprehensive bank
risks indicator; bank size have not been considered in previous studies) over <strong>the</strong> period 2006-2009
using data for <strong>the</strong> UAE banks.
The main explanatory factors, which have been considered in previous
studies, are investment in information technology (IT) systems and bank pr<strong>of</strong>itability. investment in IT
systems hypo<strong>the</strong>sis presupposes that increasing <strong>of</strong> investing in IT could reflect a bad sign and
threaten <strong>the</strong> job security for some employees and might lead in turn to reduction in <strong>the</strong> production and
innovation level <strong>of</strong> <strong>the</strong>se employees and hence ICP.
Bank pr<strong>of</strong>itability hypo<strong>the</strong>sis reassumes that <strong>the</strong> success might lead to ano<strong>the</strong>r success. That is
achieving <strong>of</strong> pr<strong>of</strong>its means that <strong>the</strong> bank has got fund which can a part <strong>of</strong> it used to reward <strong>the</strong> best
intellectually performance employees and in turn enhancing <strong>the</strong> ICP.
However, none <strong>of</strong> <strong>the</strong> previous studies <strong>of</strong> factors affecting ICP have considered earnings quality; bank
age; listing age; inflation; foreign ownership; bank risk and bank size as paths <strong>of</strong> explaining ICP.
Earnings quality hypo<strong>the</strong>sis states that <strong>the</strong> high <strong>the</strong> quality <strong>of</strong> earnings, <strong>the</strong> less he need for
intellectual work to manage <strong>the</strong>se earnings. The age <strong>of</strong> <strong>the</strong> firm hypo<strong>the</strong>sis states that ICP for older
banks will be less than younger banks because it’s less risky. The listing age hypo<strong>the</strong>sis presuppose
that ICP for earliest ra<strong>the</strong>r than eldest listing banks will better to gain more creditability in <strong>the</strong> market
and hence be able to obtain external funds. Inflation hypo<strong>the</strong>sis presuppose that increasing in retail
index price will lead to inflated in <strong>the</strong> amount <strong>of</strong> calculated ICP. Foreign Ownership hypo<strong>the</strong>sis
assumes that allowing <strong>of</strong> foreign ownership might lead to enhancing <strong>of</strong> ICP for <strong>the</strong> sake <strong>of</strong> attracting
more foreign investment. Bank risk hypo<strong>the</strong>sis <strong>the</strong> ICP for <strong>the</strong> high risky ra<strong>the</strong>r than less risky banks
should be better to overcome this issue. The size hypo<strong>the</strong>sis states that ICP for larger ra<strong>the</strong>r than
smaller banks will be less because it’s less risky.
The results show that earnings quality, bank age, listing age, inflation; bank risk measured by total
reserves as a comprehensive bank risks and bank size variables which have not been considered in
previous studies, have a significant impact on ICP. In addition <strong>the</strong> results show that investment in
information technology systems and bank pr<strong>of</strong>itability have significant impact on <strong>the</strong> ICP. On <strong>the</strong> o<strong>the</strong>r
hand, <strong>the</strong> results show foreign ownership variable, which has not been considered in previous
studies, has no impact on <strong>the</strong> ICP.
There are some limitations to this study. First, more evidence is needed on <strong>the</strong> factors explaining ICP
l before any generalisation <strong>of</strong> <strong>the</strong> results can be made. Second, <strong>the</strong> empirical tests were conducted
only on <strong>the</strong> UAE bank over <strong>the</strong> period 2006-2009 and hence <strong>the</strong> results <strong>of</strong> <strong>the</strong> study cannot be
assumed to extend beyond this group <strong>of</strong> banks or to different study periods. Finally, <strong>the</strong>ories such as
financial crisis, market structure and role duality might be considered for fur<strong>the</strong>r research as a
possible explanation for ICP.
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