Efficiency of commercial banks in Malaysia using vaic method / Rosita Haji Suhaimi and Emerline Carol Henry

ICT has not been much considered as an important variable for intellectual capital measurement in previous studies. According to the Organization for Economic Co-operation and Development (1996), ICT is best regarded asthe
facilitator of knowledge creation in innovative societies. In the knowledge based economy, ICT is not only considered as a driver for change but as a tool for releasing the creative potential and knowledge embodied in people. A study of banks in UK found that Information Technology (IT) has a significant impact on intellectual capital performance (VAIC) (El-Bannany, 2008). Prior to the
globalization and liberalization era, the commercial banks in Malaysia were facing stiff competition in terms of providing a variety of products and services,
especially when Bank Negara opened up the financial sector to qualified foreign banks in its effort to drive domestic banks to better performance, efficiency, and
innovation. Besides that, banks have been able to better serve their customers with the advance of ICT, by the usage of smart cards, ATMs, mobile banking, electronic banking, telephone banking, twenty four hour service, the overall
quality of services, expanded portfolios of products and services, and better customer relationship management with the use of advanced tools and variety of
products. Therefore, ICT has not only provided infinite banking opportunities to expand product and services beyond reach, but also heightens the competitions
and risks faced by banks in the financial system (Voon-Chong et al, 2010). This study basically seeks to investigate to what extent the commercial banks are
efficient in terms of value creation efficiency and to see whether there is a relationship between the Value Added Intellectual Coefficient(VAIC) and financial performance. Hence, this study will include ICT efficiency as another component in the VAIC method.