METHODOLOGY

The study examined the effect of Intellectual Capacity on productivity in Ghanaian banking industry. The
data for the study was sourced from the Banking Supervision Department of the Bank of Ghana and
covered annual financial statement from 2003 to 2011. The inputs from the income and balance sheet
statements were extracted to estimate intellectual capital and productivity variables. The final sample
used for the study included 18 out of the 27 banks with available data for all the nine year study period.
The study used a 3 stage empirical strategy in testing their hypothesis.

The first stage used the annual data on 18 banks from 2003-2011 which employed the Value Added
Intellectual Coefficient(VAIC)(2) of Pulic (1998,2001) to estimate intellectual capital performance. The
VAIC method asses the Intellectual capital is vital for value creation in organisations and made up of the
sums of (HCE,SCE, and CEE). HCE is the value added by investments in employees and related
capabilities. SCE is the use of structural capital in adding value to the firm. CEE also measures the value
addition made by capital invested by shareholders.

The second stage , the study estimated bank productivity using Malmquist Productivity Index which
measured productivity changes over time periods. Index which measured productivity changes over
different time periods. The index was made up of technological changes and efficiency changes

Technological changesreflects improvements in performance driven by new product developmeents and

innovations. The eeficiency changes is decomposed into pure efficiency change and scale efficiency
under assumptions of variable returns to scale.

The third stage examined the effect of intellectual capital and other contextual variables on bank
productivity using panel regression analysis

Hypothesis

The study expected VAIC and its constituents HCE,SCE, CEE to positively influence bank performance
measures by productivity indices. The following hypothesis were therefore tested

H1; VAIC drives greater bank productivity

H2; HCE drives greater bank productivity

H3;SCE drives greater bank productivity

H4;CEE drives greater bank productivity

H5; Increases in firm size drives greater bank productivity

H6; increase in market concentration results in bank productivity declines