Determining the Impact of Intellectual and Human Capital on the Firm’s Value: A Case of the US Banking Sector

Aims & Objectives: The following research study has examined the effect of intellectual and human capital on firm value in the U.S. banking industry, particularly the moderating influence of firm size.

Methods: Based on the Resource-Based View (RBV) and Human Capital Theory, the study examined how intangible assets enhance competitive advantage and sustainable value creation. With a panel dataset of 30 NYSE-listed U.S. commercial banks over 2010-2024, and Generalised Least Squares (GLS) regression to account for heteroscedasticity and autocorrelation, the research discovered that human capital, as represented by revenue per employee, had a significant positive effect on firm value (β= 0.063, p-value= 0.004). However, as represented by goodwill and intangible assets, intellectual capital had a significant negative effect (β=-0.038, p-value= 0.00), indicating that not all intangible investments are properly utilised. The findings showed that firm size significantly moderates the relationship between goodwill and firm value (β= 2.139, p-value = 0.00) and between net profit per employee and firm value (β= 0.002, p-value = 0.00). This implied that the size of the firm played a significant role in moderating these relationships, as big banks are in a better position to leverage intellectual and human capital in value creation.

Results: These results emphasised the significance of strategic consistency in managing intangible resources. In practice, the research indicated that it is essential for banks not only to acquire intangible assets but also to integrate and leverage them effectively. It also suggested firm-specific strategies by size to maximise the value obtained from human and intellectual capital in an evolving, knowledge-based industry.

Keywords: Intellectual capital, human capital, firm value, firm size.

1. INTRODUCTION

The US banking sector has experienced significant transformation in recent decades, driven by technological advancement, regulatory changes, and the increasing importance of tangible assets such as intellectual and human capital. The US banking sector has transformed through AI, mobile banking, and RegTech, increasing efficiency and customer experience (Adewumi, 2024). Regulatory changes like Dodd-Frank and Basel III strengthened oversight of the banking sector (Hanson et al., 2024). The focus on intellectual and human capital drives innovation and resilience (Agostini & Nosella, 2023). These changes indicate adaptation to technological progress and evolving financial landscapes (Cao et al., 2022). The evolution of the U.S. banking industry is a strategic realignment to innovation, compliance, and talent acquisition to keep banks competitive and strong in a digital and dynamic financial landscape.

The capacity of banks to tap intellectual capital, such as proprietary technologies, patents, data analytics capabilities, and innovation capital, has become important to perpetuate competitive advantage in the fast-changing financial sector of today (Kamukama & Sulait, 2017). Intellectual capital refers to all knowledge assets that promote a firm’s competitiveness, for instance, innovation capital, relationship capital, and knowledge capital (Ali & Anwar, 2021; Quintero-Quintero et al., 2021). Such assets are indispensable in creating new solutions, niche markets, and sustaining long-term differentiation (Al-Khatib, 2022). Those banks that successfully leverage intellectual capital using cutting-edge technologies and creative strategies outperform industry averages, suggesting a definitive connection between intellectual capital and firm performance (Li & Zhao, 2018). The comprehensive use of intellectual capital allows banks to achieve innovation, strategic market positions, and improved firm performance, making it the key driver of enduring competitiveness in today’s financial sector.

Human capital is also very important, as it incorporates the intellectual ability, expertise, experience, and innovative potential of a bank’s employees. Human capital plays a critical role in implementing strategies, making effective decisions, and innovation (Tran & Vo, 2020). In Knowledge-Intensive Business Services (KIBS) such as banking, customer service, and financial knowledge being so critical, human capital emerges as a central driver of value creation (Zieba, 2021). Since the industry is becoming more automated and technologically reliant, the role of professional individuals with the ability to adapt and drive change becomes very important (Xu & Li, 2022). Innovation and learning in human capital are hence essential to enable banks to compete in the face of high market dynamism (Soewarno & Tjahjadi, 2020). Human capital, through its knowledge, flexibility, and innovative potential, is critical to ensuring strategic implementation and value addition (Gerhart & Feng, 2021). Therefore, it is a key resource that banks need in an increasingly dynamic, technologically driven business environment.

The purpose of this research is to analyse the independent value contributions of intellectual and human capital for firms within the U.S. banking industry. The key issue that this study addresses is the subpar performance of certain banks as a result of not recognising, and strategically utilising these intangible assets effectively. Banks traditionally focused more on physical assets and technological infrastructure, generally ignoring the strong influence of intellectual and human capital on innovation, competitive strength, and sustainable growth (Ali & Anwar, 2021). By examining the impact of these elements, this study aims to provide inputs that can help banks maximise their intangible assets to improve firm performance and long-term value.

While (Malikah & Nandiroh 2024) are helpful in outlining how intellectual capital is positively related to firm value, their review points out that there remains ambiguity about the contextual factors that can affect this association. In particular, there is limited empirical work examining how the firm size moderate’s intellectual capital’s effect on firm value. Considering large and small banks significantly vary with respect to resource endowment, innovation ability, and strategic intent, the impact of intellectual capital would also differ accordingly. This deficiency is especially significant in knowledge-driven industries such as banking, where intellectual and human capital are key performance drivers. The current research hence contributes to the knowledge by evaluating the moderating effect of the firm size on the intellectual and human capital-firm value relationship and provides more refined findings to guide bank-specific strategies tailored to differently sized banks.

These findings will be especially useful to decision-makers and policymakers who wish to develop appropriate strategies for talent development, innovation expenditure, and knowledge management in the banking industry. With knowledge about how firm size affects the relationship between intellectual and human capital and firm value, stakeholders will be able to develop more targeted and successful methods of resource allocation and strategic planning. Further, this study provides real-world insights into maximising intangible assets in different organisational environments. The research also contributes to the theory development of the resource-based and knowledge-based approaches through contextualising intellectual capital’s role within a dynamic, service-oriented, and knowledge-intensive sector such as the banking sector.

2. LITERATURE REVIEW

2.1. Intellectual Capital and Firm Value

The interplay between intellectual capital and firm value can be best understood by applying the Resource-Based View (RBV) and Knowledge-Based View (KBV). RBV suggests that firms derive competitive advantage from specialised, valuable, and imitable internal resources, and intellectual capital is a good example (Ali & Anwar, 2021; Ujwary-Gil, 2017). KBV takes it further by focusing on knowledge as the most strategically valuable resource. Intellectual capital, which includes structural and relational capital, fuels innovation, strategic choice, and effectiveness, all leading to increased firm value (Kengatharan, 2019; Yunita & Prastiwi, 2021). As companies consistently evolve with innovations in technology and the market, the successful deployment and replenishment of intellectual capital become crucial to maintaining long-term value and competitive advantage in knowledge-based industries (Tran & Vo, 2020).

(Li & Zhao 2018) analysed the relationship between intellectual capital and firm value using 1,203 Chinese listed companies with system GMM and IV estimation. They discovered that organisational capital has a positive effect on firm value with a lag. This indicates a subtle relationship between the intellectual capital elements and firm value. Furthermore, the study of (Nguyen and Doan, 2020) also investigated the relationship between intellectual capital and firm value. The study utilised a sample of 61 Vietnamese manufacturing firms. The results from OLS, random, and fixed effect models reflected a significant and positive relationship between intellectual capital and firm value, providing insights for value-increasing strategies. The study of (Ni et al., 2021) also confirmed that firm value is positively affected by the intellectual capital of the firm in Taiwan. It has been indicated that the intellectual capital of the organisation would provide an advantage for innovation and an excellent reputation that can encourage people to consume and invest more. The findings are also further confirmed by the study of (Appah et al., 2023), which presented that in LQ-45 index companies of Indonesia (which consist of the top 45 Indonesian companies by market cap), intellectual capital has a significant and positive impact. However, the study of (Maditinos et al., 2011) revealed that intellectual capital does not have a significant impact on the relationship between intellectual capital and firm value. Based on these studies, the following hypothesis is developed;

H1: Intellectual capital has a significant and positive impact on the firm value.

2.2. Human Capital and Firm Value

According to Human Capital Theory, expenditure on education, training, and skill acquisition boosts employees’ productivity, affecting organisational performance and market valuation directly (Bangara et al., 2024; Özera, 2016). In knowledge-intensive industries, where expertise and innovation create growth, human capital becomes a prime force behind firm value (Kingori, 2025). Therefore, companies that successfully build and utilise human capital are likely to be more successful over the long term (Veltri & Silvestri, 2011). Hence, this theoretical stance supports the positive impact of human capital on firm value.

The study of (Sisodia et al., 2021) evaluated the relationship between human capital and firm value in Indian firms and found a positive relationship between these variables. Human capital increases current and future growth opportunities and declines growth volatility. Furthermore, the study of (Wang & Yu, 2023) have also reflected the positive and significant impact of human capital with firm value. It has been indicated that the knowledge and skills of human capital significantly impact the profitability, which further leads to the increased valuation of the firm in the market and better investor perception. The study of (Ni et al., 2021) also confirmed a positive relationship between human capital and firm value. However, the research of (Li & Zhao, 2018) has not confirmed any significant relationship. Therefore, the following hypothesis is developed based on the discussion above;

H2: Human capital has a positive and significant impact on firm value

2.3. Moderating Effect of Firm Size

Firm size can moderate the association between both intellectual capital and human capital with firm value through various mechanisms based on the Resource-Based View (RBV) and Organisational Theory. Larger firms often have more formalised systems, better access to financial resources, and established processes that can facilitate improving the efficient utilisation of human and intellectual capital (Jordão & Novas, 2017; Ployhart, 2021). For example, in big companies, human capital, which is based on employee skills, knowledge, and experience, can be optimally utilised because of formal training systems, knowledge-sharing mechanisms, and a co-operative organisational culture that together enhance its value contribution to the company (Waititu & Barker, 2022). On the other hand, small businesses do not have the ability to utilise or retain skilled staff fully and thereby undermine the performance impact of human capital (Ni et al., 2021).

Likewise, intellectual capital, including proprietary technologies, patents, and organisational systems, could have varying impact with firm size (Pak et al., 2025). Larger companies are in a more favourable position to capitalise on innovations, enforce intellectual property, and leverage economies of scale, maximising the value extracted from intellectual capital (Sari et al., 2022). Smaller companies might struggle to establish and scale such intangible assets because of low levels of infrastructure and investment capabilities (Malikah & Nandiroh, 2024). Thus, firm size serves as a moderating variable that defines the degree to which human and intellectual capital are realised as enhanced firm value, escalating or limiting their effect based on organisational scale.

H3a: Firm size moderates the relationship between intellectual capital and firm value

H3b: Firm size moderates the relationship between human capital and firm value

3. Methodology

This research utilises a quantitative research approach to analyse the influence of intellectual and human capital on firm value in the U.S. banking industry. The quantitative research is useful in testing the hypothesis and test cause and effect relationship (Fischer et al., 2023). This method was also adopted by the study of (Akgün & Türkoğlu, 2024; Fitri et al., 2024 and Wang    et al., 2021) when evaluating these dynamics. A secondary data method was utilised, with financial and firm-specific information gathered from Refinitiv, a well-established and commonly used financial information portal. The research targets listed U.S. banks during the period 2010 to 2024 to gain a thorough analysis through varying economic conditions and regulatory regimes.

The original sample was drawn from the largest 50 U.S. banks ranked by total assets, as listed on the S&P Global Market Intelligence website provided by (Villaluz, 2024). This ranking was used as a reference to ensure the sample was comprised of the largest and most representative institutions in the U.S. banking industry. To ensure the study remained relevant and consistent, asset management banks, brokers, and insurance firms were not included because their business models and performance measures are very different from those of conventional commercial banks. The companies with missing data, especially firms with missing data for more than seven years in the study period, were also excluded for the purpose of ensuring data reliability and robustness of analysis. Following the application of these inclusion and exclusion criteria, the sample was 30 New York Stock Exchange (NYSE) listed commercial banks. The filtering ensures that the chosen banks are not only some of the largest and most powerful banks in the U.S. but also have sufficient and stable financial reporting for the duration of the study. This approach allows for a targeted and reliable sample for the evaluation of how intellectual and human capital add value to the firm, while also accounting for sectoral and availability issues, further generalisability and validity of the results.

This research employs various important variables to test the link between intellectual capital, human capital, and the value of the firm, measuring in line with the methodology of (Ni et al., 2021). Intellectual capital is quantified based on goodwill and intangible assets covered by the balance sheet. Such items proxy for the value of non-physical resources such as reputation, patents, and systems that are the keys to the acquisition of competitive advantage. Human capital is quantified in terms of two measures of efficiency: revenue per employee and profit per employee, reflecting the productivity with which a company’s human assets generate revenues and profits. The dependent variable, firm value, is measured by Tobin’s Q, an estimate of the ratio of the market value of a firm to the book value of its assets and a reflection of investor expectations of company performance (Ghani et al., 2023). Firm size, the moderating variable, is only measured using the natural logarithm of total assets so that firms of varying sizes may be compared in a comparable, and normalised scale. Two control variables are also used to account for financial structure: the debt-to-equity ratio, which captures the firm’s level of leverage, and the debt-to-assets ratio, which captures the percentage of assets that are financed using debt. These specifications in combination enable a strong examination of how intellectual and human capital impact firm value for firms of different sizes. Table 1 below shows the variable measurement of the variables along with source from which data was obtained.

Panel
data regression analysis is used in the study to investigate intellectual and
human capital’s association with firm value over time among different firms.
Both Fixed Effects Model (FEM) and Random Effects Model (REM) are used to
control for unobserved heterogeneity (Pesaran, 2015). The Hausman test is used
to ascertain the better model between REM and FEM. Heteroscedasticity and
autocorrelation diagnostic tests are used to check for the validity of the
model (Mátyás & Sevestre, 2013). According to the existence of these
problems, the research utilises the Generalized Least Squares (GLS) model,
which adjusts for heteroscedasticity and autocorrelation, yielding more
efficient and accurate coefficient estimates.

4. METHOD

4.1. Descriptive Statistics

Table 2 shows descriptive statistics of the variables with significant implications for firm performance in U.S. banking. Operating revenue per employee has a mean of $299,022 million and a standard deviation of $219,572 million, reflecting considerable heterogeneity in bank employee productivity. This indicates that some banks might be more efficient at utilising human capital compared to others. Net profit per employee likewise has a high variance, with an average of $78,579 million and standard deviation of $64,931 million, thereby potentially revealing profitability variances through managerial efficiency or effective workforce.

Goodwill as a measurement of the intellectual capital also reflects a mean of $9,671 million and a standard deviation of $12,803 million, indicating a difference in investment in intangible assets and possibly inducting innovation capacity and competitive ability. Debt to equity demonstrates high mean value of 170.87% and standard deviation of 126.02%, indicating varying risk preferences and financial approaches. Tobin’s Q, at mean 0.25 and standard deviation 0.16, imply that the firms are undervalued. Debt to assets indicates minimal variability with mean 89%, and standard deviation of 3%, showing significant proportion of asset financing through debt. Firm size has mean of 12.20 with standard deviation of 1.33 possesses moderate variability, suggesting size differentials in capital utilisation and strategic ability. These results highlight the imperative for banks to better manage intellectual and human capital in order to improve firm value.

4.2. Correlation Analysis

Table 3 correlation analysis identifies a number of strong relationships between the study variables. Goodwill is positively and significantly correlated with size (r=0.7840), which means that big banks contain more intangible assets, probably as a result of acquisitions and the build-up of brand values. Net profit per employee is positively and significantly correlated with Tobin’s Q (r=0.1505), which implies that higher human capital efficiency is linked with higher value for the firm. Operating revenue per employee also shows positive and significant correlations with Tobin’s Q (r=0.2571) and debt to equity (r=0.4694), implying that higher employee productivity can influence both market valuation and financial leverage. Interestingly, Tobin’s Q has a negative correlation with debt to assets (r= -0.254) and firm size (r= -0.1408*), suggesting that higher leverage and larger size may be viewed less favourably by the market. The weak and significant correlation between goodwill and Tobin’s Q (r= -0.1847) might imply that not all intangible assets directly translate into firm value. These results underscore the complex interactions between intangible assets, financial structure, and firm value, with human capital efficiency emerging as a more consistent positive contributor.