TABLE OF CONTENTS

ABSTRACT................................................................................................................ 2
CHAPTER 1: INTRODUCTION..................................................................................2
1.
Introduction........................................................................................................2
1.1. Problem Statement Definition....................................................................4
1.2. Research Objectives.................................................................................5
1.3. Significance of Study.................................................................................5
1.4. Scope and Feasibility Study......................................................................7
1.5. Conceptual Model.....................................................................................8
CHAPTER 2: LITERATURE REVIEW......................................................................10
2.
Literature Review.............................................................................................10
2.1. Human Resource....................................................................................13
2.2. Employee................................................................................................15
2.3. Market Requirements..............................................................................17
2.4. Organisation............................................................................................19
2.5. Financial Growth.....................................................................................23
CHAPTER 3: RESEARCH METHODOLOGY..........................................................28
3.
Research Methodology....................................................................................28
3.1. The Methodology Adopted in This Thesis................................................28
3.2. Mixed Approach Research: Quantitative and Qualitative Approaches.....29
3.3. Research Design and Questions.............................................................30
3.4. Analytical Methods and Techniques........................................................31
3.5. The Validity of the Analytical Techniques and Approaches......................33
3.6. Contribution of This Research Study.......................................................34
CHAPTER 4: ANALYSIS OF DATA AND FINDINGS...............................................35
4.
Analysis of Data and Findings..........................................................................35
4.1. Hypothesis H1 to H4...............................................................................35
4.2. Hypothesis H5.........................................................................................37
4.3. The Importance of Intellectual Capital Development in the Financial
Industry...................................................................................................42
4.4. The Relationships between Intellectual Capital and Financial Performance
................................................................................................................44
CHAPTER 5: RECOMMENDATION, LIMITATIONS AND CONCLUSION...............46
5.
Recommendations, Limitations and Conclusion...............................................46
5.1. Summary of the Research Study.............................................................46
5.2. Recommendation....................................................................................48
5.3. Limitations...............................................................................................51
5.4. Conclusion..............................................................................................52
REFERENCES......................................................................................................... 55

The Review of Financial Growth in Developing

Intellectual Capital for the Financial Industry in
Malaysia

ABSTRACT
Despite increasing attention paid to intellectual capital research, this research study
is to review of financial growth of developing Intellectual Capital for financial industry
in Malaysia. The financial performance and business growth of an organisation is
indirectly affected by the level of staff competency. The sustainability and innovative
of an organisation is highly depending on the competency skills of every employee
and regular development in intellectual capital is vital in this knowledge era. Human
Resource, Employee, Market Requirement and Organisation were variables
identified and evaluate separately and having direct relationship with financial
performance of an organisation.
This research study is adopted mixed approach which is the combination of
quantitative and qualitative approaches. Both approaches provide evidence and
importance in developing intellectual capital that will increase financial performance
and business growth of an organisation in long term.

CHAPTER 1: INTRODUCTION
1. Introduction
This research study review the financial growth in developing intellectual capital
for the financial industry in Malaysia by evaluating attributes identified that deem
having significant influence toward developing intellectual capital in financial
industry in Malaysia.
The issue of Intellectual Capital is growing significantly and becoming an
importance research subject for Accounting due to its role in determining the
value and performance level of an organisation. Intellectual Capital represents
the collective knowledge that is embedded in the personnel, organisational
routines and network relationships of an organisation (Steward, 1997; Bontis,
2002; Kong, 2008a).

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In todays rapidly changing business environment, managing Intellectual Capital

(IC) become an essential requirement for staying competitive. Long term
sustainability for a business may be determined by the company ability to expertly
utilize the resources to address a constantly changing market and economic
environment.
Information technology has encouraged the development of business sector. This
development leads to growing interest towards asset management practice,
especially intangible assets. Intangible assets were used as guidelines for
investors to evaluate companies as well as competitive advantage (Kaplan and
Norton 2004). The market value of an organisation is the result of adding tangible
assets and intangible assets (Edvinson and Malone, 1997). The intellectual
capital is used to name the joining of assets which are not recorded anywhere in
a company financial statements and they are important to the organisation future
growth and performance. One of the most significant of intellectual capital
sources is knowledge.
The capability and effectiveness in managing Intellectual Capital give a significant
contribution in financial growth of an organisation. The financial growth will
ultimately determine the success of an organisation. The resources management
of intellectual Capital by an organisation transforms their knowledge, skills, idea
and invention in creating business value to help in development in Financial
Industry in Malaysia.
In order to know the financial growth in developing Intellectual Capital for the
Financial Industry in Malaysia, this paper is structured into four (4) main
variables: Human Resource, Employee, Market Requirement and Organisation
that explains the important of Intellectual Capital and finally the collective
information that transform into a business decision by an organisation on the
investment allocation in developing Intellectual Capital in financial industry. The
investment allocated, signify the level of concern and intention taken toward
organisation success.
The prime objective for a successful organisation is to ensure the profitability
level is achieve and growing continuously, nonetheless an adequate development
on staff should have an equal attention too as this will strengthen the organisation

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background and marketplace. Knowledge is the key driving tools for a business
success.
Most organisation would focus more on how to develop their business, how to
strike more income and secure it position in the marketplace. This concept of
strategic planning is valid widely across all market participants in financial
industry, while adequate investment on development in Intellectual Capital will
create greater synergy and benefits which may bring new approaches, new
technologies and new areas of specialization that even bring an organisation to
the greater high position.
Every new business development requires technical talent and technical talent is
not born naturally, it required continuous development and up-to-date information
from market. Should the shortage talent situation happen the worst of an
organisation would outsource the entire project to professional body in order to
launch to the market. The total cost incurred extremely high and this situation can
be resolved should an organisation start developing and invest in Intellectual and
having long-term benefits toward organisation in view of the training attend and
knowledge acquire can be applies anytime as and when in needs by an
organisation.
Consequently, the critical shortage of technical talent in financial industry can be
addressed if all the relevant participants to financial sectors willing to forge their
effort together on a continuous basis to elevate their concern in Intellectual
Capital development.
1.1. Problem Statement Definition
This research paper is to explore and address the internal and external factors
and importance of developing Intellectual Capital (IC) in financial industry in
Malaysia. The investment allocated for staff development and training by an
organisation remark a significant initiative to support and developing Intellectual
Capital within an organisation. Hence, to understand the organisation objective
and intention is crucial and difficult in view of most organisation treat this piece of
information as highly private and confidential and oblige to The Data Protection
Act.

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Obtain such data is impossible, this research paper will mostly base on the
previous works done by researcher and by way of the published financial
statement of an organisation.
The following problems were encountered to materialize with the research title.

The Intellectual Capital (IC) does not play an important role to an

organisation success.

The internal and external factors having no significant impact toward

organisation success as well as financial growth.

Intellectual capital will not be the key indicator to determine the

financial growth and success of an organisation.

Most organisations not willing to invest in Intellectual Capital while

focuses more on profit generate business activities.

They would be others significant factors to determine the success of

an organisation again with intellectual capital.

1.2. Research Objectives

The purpose of this research is to review of financial growth in developing
intellectual capital for the financial industry in Malaysia. The building and
development of intellectual capital is the basis tools driven knowledge and talent
and ensure it stay competitive and for long term organisation growth.
The following research objective been considered:

The critical review of Intellectual Capital and it is impact in Financial

Industry.

The critical review of the variables that impact Intellectual Capital

toward organisation success.

The developments of a model of financial growth that can cause

Intellectual Capital to be strengthen in order to create organisation
success.

1.3. Significance of Study

The identification of intellectual capital accurately been having direct impact to a
business growth as the intention in skills development would be the key focus
and important to an organisation and firm and in-line with organisation strategic
plan.

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The substantial training development being largely introduced, highlighted and

emphasized by most of the consultant firm and training institutions were agreed
that intellectual capital development would have significant influence to an
organisation and believed employee with skills trained would eventually be able
to excel their career as well as contribution to an organisation in term of business
diversification and growth.
Business require new idea to growth, so as the employee need self improvement
to cater for various task requirements were it might be facing on day-to-day jobs
assignment. Hence, the development of soft skills can meet self objectives while
it able to utilize the new knowledge learned and applies into it existing works and
businesses.
Higher learning institution, Colleges and Universities are updating their teaching
material to assure skills acquire able to apply and meet current market
requirements. The knowledge learned able to help all graduate to excel and
understood the market needs from respective industries.
Awareness created among financial industry and importance of Intellectual
Capital development given a signal on issue of critical shortage of technical talent
in financial sector as well as within an organisation. Economic crisis, problem
solving, critical thinking skills, people management, business and product
development, all these require knowledge background and skills. Nonetheless,
organisation alert that, new graduate and existing staff needed to refresh,
upgrade, and constantly update their market knowledge in order compete with
their competitor to secure business income.
What it would be for an organisation to start a business while he or she does not
know anything inclusive of local law and governance, foreign exchange policy,
product knowledge, regulatory requirement? This is an alarming message that
the knowledge is crucial in all conditions that there is a need for an organisation
to maintain an adequate amount of fund on staff training, update information
technologies and attending economic conference in order for them to know the
current market requirement and the sensitivity toward market movement is vital.
This will also address the issue of readiness of an organisation to venture into
new business and issue of shortage talent within an organisation.

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In addition, organisation should have an abilities to select and identify talent that
having potential to be a management staff. These are the group of people where
organisation willing to invest to train, develop and grow them. This group of
people is the future of the company and their knowledge to bring the company to
a greater milestone.
The research on the relationship between Intellectual Capital and company
performance is inconclusive especially if it associated with market performance.
One of the factors that determine a company performance is economic factors
and it is very interesting that until now there are not studies that investigate the
performance of Intellectual Capital during crisis and post-crisis conditions. The
research of Intellectual Capital in economic conditions is very important because
it investigate the consistency of the relation between Intellectual Capital and
corporate performance in different economic conditions.
Therefore, the investment made by a participant in financial sectors to strengthen
their status in financial industry in Malaysia is crucial. Consequently, talent with
diverse technical background is vital and unfortunately the issue of shortage in
term on knowledge and skillful personnel is the factor that pull back market
participant when commerce with business diversification as well as change
management to effectively address to international standard level. Such initiatives
require vast knowledge as a supporting ground before continues to next stage of
action. The development of Intellectual Capital is an essential move should be
taken by market participants to strengthen internal as well as external resource.
1.4. Scope and Feasibility Study
To evaluate and highlight the important of intellectual capital development and
benefits gain toward business sustainability. The significant differences in
organisation or firm which has highly focus on intellectual capital development
and their market status.
Organisation requires innovative ideas to change and full participation from
respective employee is essential in order to manage business success and stay
competitive advantage.

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As such the evaluation and analysis will be focused on the components identified
that will having direct impact in building an organization success is considered.
The financial growth in allocation of staff training funds plays a major impact
toward long-term sustainability for an organisation. The investment sum and
concern in developing intellectual capital by accessing their financial statement
and comparison made. This would able to identify their intention and initiative
made by an organisation apart from business, staff development also part of their
concern in order to build future talent in an organisation.
The response collected by interviewees and expenditure recorded in financial
statement of an organisation, the growth percentage recorded by year indicate
their intention and concern in developing Intellectual Capital. The collaboration
effort of Human Resource, Employee, Market Requirement and Organisation
create solid base of a financial industry in Malaysia
1.5. Conceptual Model

Human
Resource

Employee

H1

H2

Intellectual
Capital (IC)
Market
Requirements

H3

Organisation

H4

F
I
N
A
N
C
I
A
L

H5

Financial
Industry

G
R
O
W
T
H

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H1)

Human Resource is responsible to manage Intellectual Capital and

competency of every employee in the organisation.

H2)

Employee career path and future development should be managed

by themselves and Human Resource as motivator to create employee
motivation.

H3)

Current

market

requirement

would

directly

influence

the

development of Intellectutal Capital of an organisation.

H4)

Organisations strategy plan would determine the level of impotency

in development of Intellectual Capital.

H5)

The

attribution

of

Human

Resource,

Employee,

Market

Requirements and Organisation having significant impact toward Financial

Growth in Financial Industry in Malaysia.

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CHAPTER 2: LITERATURE REVIEW

2. Literature Review
The issue of intellectual capital is growing significantly and becoming an
importance research subject for an accounting due to its role in determining the
value and performance level of a company. Edvinson (2000) stated that
intellectual capital becoming more important and interesting subject for an
investigation, it involved several topics surrounding intellectual capital such as
perspective, alternative measurement, disclosure, impact on market and financial
performance and means of gaining competitive advantage.
Intellectual Capital is defined as the sum of a company knowledge that is
contributed to an improved competitive position of the organisation by adding
value to the defined key stakeholders (Edvinson 1997, Marr 2004, Steward
1997). Intellectual capital become the newest hot topic in the business community
since the 1990s when Skandia the Swedish company suggested an extension of
intellectual capital statement to the company report named the Navigator
(McConnarchie 2007, Chu, Lin, Hsiung & Liu 2006). Skandia distinguished
intellectual capital into two categories, the structural capital and the human
capital. Structural capital is defined as infrastructure that organizations develop to
commercialize their human capital. It includes both direct and indirect support and
for each there are both physical and intangible elements (Edvinsson & Sullivan
1996). Structural capital includes customer capital (external) and organizational
capital (internal). Organizational capital consists of innovation and process
capitals. Process capital is the sum of a company know-how processes.
Innovation capital includes intangible assets and intellectual property which is the
source of renewal for the company. Human capital is defined as the collective
capabilities of the employee competence, attitude and intellectual agility (Roos &
Edvinsson 1997). This asset includes experience, skills and know-how of the
employees.
The concept of Intellectual capital has been developed to another level beyond
business approach. The new observation on intellectual capital is the basis for
wealth in communities, regions and nations (World Bank 2005). Social values
such as connections, relations and interactions in a networked society must be
considered as value added for a community (Jay 2006). Many countries in
Europe, America and Asia are acknowledging and attempting to get basis to

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operate knowledge-based capability and intangible wealth especially in private

sector, educational community and governments.
International Federation of Accountants (IAFAC) also offers a definition of
intellectual capital. According to this financial institution (1998), intellectual capital
is a capital property that is based on knowledge. Ulrich (1998) stressed that
intellectual capital is the knowledge and skills that an employee have. Further,
Sanchez (2007) affirmed that intellectual capital is a sum of all the knowledge in a
company. Edvinsson and Malone (1997) agreed that intellectual capital is a
management of employee knowledge, experience, skills, customer relations,
technologies and innovation. The statement further confirmed by scholars Zeghal
and Maaloul (2010), Palumickaite and Matuzeviciute (2007) intellectual capital as
an amount of knowledge that help in creates and can be converted into company
value added and is a driving force behind the modern economy and creates
value.
This research papers is using the Resource-Based View theory (RBT) which is
based on strategic management and company competitive advantage that
believed a company will be achieving competitive advantage when it possess
superior resources in an organisation (Collins and Montgomery, 2005). ResourceBased View theory will gain competitive advantage and optimal performance by
acquiring, combining and using vital assets to gain competitive advantage and
optimal performance (Wernerfelt, 1984). Tangible and Intangible assets are both
inclusive.
Kaplan and Norton (2004) highlighted the role of intangible assets in the learning
and growth is an essential factor for any organisation to achieve its profit and
turnover. This supported by Klaila and Hall (2000) that a good management in
intellectual assets is a strategy that will bring success for the company future.
This proves that the role of intellectual capital is essential and is worth further
investigation.
Previous studies carried out by researcher (Zhang 2006, Wang 2008, Solikhan
and Roman, 2010, Clarke 2010 and Soewarno 2011) discovered the relationship
of intellectual capital and company performance and both are closely related to
each others. Company performance is affected by the economic conditions of the
country where the company is located. Country economic and politic having co-

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related influence and direct impact toward ogranisation growth, the economic
crisis and Global Financial Crisis occurred become a domino effect that led to the
bankruptcy of financial institutions.
Kaplan and Norton (2001) agreed that organisation which can focus on strategy
will acquire, unite and develop employee for the strategy of the organisation since
employees will implement the strategy. This further acknowledged by Belkaoui
(2003) that the incorporation of tangible and intangible assets is a potential
strategy to improve the company performance.
Wang (2008) and Zhang (2006) stated that intellectual capital affects the
performance of companies in Return on Asset (ROA) and market value. This
further supported by researcher Tan (2007) whom found that intellectual capital is
correlated with company performance and future performance as measured by
Return on Equity (ROE) and Earning per Share (EPS). Clarke (2010) further
commented that, intellectual capital affects the performance of the organisation
ROE and ROA and influence future corporate performance.
However, Kuryanto and Shafrudin (2008) having different views by applying
market indicator as a measurement tools on company performance, they found
that intellectual capital performance had no effect on company performance as
measured by ROA and EPS. Consequently, Solikhan and Rohman (2010) which
combining of financial and market performances as research indicators found that
the research agreed intellectual capital having significant affects on the
organisation financial performance (ROE) and does not affect on market
performance.
Based on the research studies conducted by previous researchers, noticed that
for an organisation that has the ability to transform the intellectual capital into a
products or services would have value added into their financial performance and
future corporate performance as well (Kaplan and Norton, 2004)
Dr Zeti Akhtar (2006) Governor of the Central Bank of Malaysia, at the INCEIF
Strategic Partnership 2006 ceremony mentioned on the focus of human capital
development in Malaysia. She highlighted that the demands on new expertise
and skills is growing significance, particularly human intellectual capital has
become the defining factor in sustaining the performance and competitiveness

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Banking industry in Malaysia and Islamic financial services sector in particular.

The developing and enhancing human intellectual capital will reinforce the efforts
to position Malaysia as an international Islamic Financial Centre (MIFC) and the
issues of critical shortage of technical talent in the industry can be addressed.
The effort and collaboration of financial industry in developing intellectual capital
in Malaysia needs to be developed and maintained on a long term basis in
establishing Malaysia a world class financial centre hub worldwide.
In order to combine the literature, it is useful to provide essential characteristic of
intellectual capital that relate to this research study. Human Resource, Employee,
Market requirements and Organisation are the main variables being identified and
evaluate that will contributes the financial growth in developing intellectual capital
for the financial industry in Malaysia. These being identify as the key components
that having significant influence in the financial industry in Malaysia as well as to
an organisation success.
The combine of these identified variables would determined and established a
solid decision made by an organisation and management toward future and
direction of an organisation to where and how far it would be and the future path
of an organisation.
2.1. Human Resource
H1) Human Resource is responsible to manage Intellectual Capital and
competency of every employee in the organisation.
Many banks find that paying attention to bank employees and drawing their
satisfaction are effective on bank performance and can bring powerful
competitive advantage for them (Arasli, 2005). Therefore human resources
should be paid attention to as the most important capital and the factor in the
success of an organisation. Human resource is the most valuable resource for
organisations and in order to increasing the productivity and efficiency of
organisation to employees need and providing mental and physical health and
fulfills their satisfaction and drawing their special attention (Zamini, 2011)
The problem today happening in many organisations is employee attrition through
resignation, retirement and employee separation from the organisation. It is
always a question mark across the mind when economy sufficiently turns around,

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the ability of an organisation to predict the most valuable employees are decided
to leave the organisation.
Employees have tremendous knowledge about their job, business processes.
Unfortunately, in most instances, their knowledge had not been transferred,
captured and made available to others. The business week article written by
Deborah Stead (Nov 2009) stated that the importance of identifying and
recognizing the importance of preserving intellectual capital. The article
discussed, that employers do not fully recognize the importance of employees by
eliminate various employee benefits programs, promotions and staff development
cost in particular. She stated that, employers should be mindful when the job
market improves and many of these employees might have chosen to leave their
current jobs for new opportunities and is time where the organisation needs them
in most. Many employers may not fully grasp what it takes to retain good people.
Consequently, intellectual capital is not only the challenge for employer todays
but most likely become tomorrows asset.
Human Resource (HR) professionals and managers have a major challenge to
identify the competency within organisation. HR managers believe that
competency is the basis for developing Intellectual Capital which drives company
productivity. Competency comprises knowledge, abilities, technologies, political
systems, and managerial and other values that provide organisation with a
competitive edge that is perceived by clients and is difficult to replicate (Prahalab
& Hamel, 1990).
Resources allocation is another key role and responsibilities of HR managers
where the appropriate and right resources being allocate with accordance with
their respective skill and knowledge. Beside, staff development would be another
key challenge and believed with the right courses being planned and arranged
would benefits to the organisation and staff. This is the win-win strategies which
able to gain staff loyalty, building good relationship among employees and
employer yet added-value for organisation advancement.
The effective resources planning and allocation of right candidate according to it
is competency is the initial success of an organisation so to effectively utilise the
exiting knowledge and skills and be able to apply and contribute to an
organisation. According to Pynes (2009, p.3) stated that HR manager is the

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design of formal systems in an organisation to ensure the effective use of

employees knowledge, skills, abilities, and other characteristic (KSAOCs) to
accomplish organizational goals.
Subsequent development, coaching and training according to job requirements to
enhance

employee

abilities

in

aspect

of

high

problem-solving

skills,

communication skills and other soft skills training where it deem necessary to the
employee. Lazear and Wild, Griggs, & Downing (1998 & 2002) agreed that,
learning will increases human capital, organisation must train and develop
workers in a rapidly changing working environment.
The conversation with human resource manager and their intention in
development staff competency skills as accordance with management decision
and having said that:
Company have budgeted sum to cater for staff development and the Head of
Department is in-charge and responsible to arrange and plan the right courses to
be attended by it sub-ordinateemployees need to upgrade themselves
regularly in order to meet the current market expectations and requirement and
ensure the latest technology being use and apply into existing works procedures
(Interviewed sources provided by ICBC Malaysia HR Manager).
The statement quoted proved that employee is an asset to an organisation and
management values their contribution as well as their career development path.
For most and top focus of HR organisation is to understand the importance of
people in an organizations and developing a complete system for measuring
impact of people to an organisation. The history, fundamentals measurements as
well as financial measurements affect significant organisaional constraints in the
value creation process. Indeed, such systems may well become even more
essential in meeting future organizational challenges, with the increasing
importance of human factors in future organizations.
2.2. Employee
H2) Employee career path and future development should be managed by
employee themselves and Human Resource as motivator to create
employee motivation.

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Employer belief that there is significant gain from employee in general, their
contributions in workforce is highly valuable assets, which senior management
must take steps to promote in order to secure the greatest benefits from them,
viewing development and management is solely in cost term. As a result, the
efficiency of organisation and business performance depends on efficient
management of intellectual capital (Ramezan, 2011)
Training affects employee retention and is a valuable commodity if viewed from
investment perspective than as expenses, can produce high returns. The benefits
and gains from intellectual capital development are numerous and include
increase in efficiency and resulting in financial gain, such innovation bring new
strength to strategies, products and company capability to adopt new technology
and business diversification for greatest financial gains. (Efoli, 2010)
Every employee should have start tracking and manage own development plan
and clearly identify what it need and where you are beside programs designed by
Human Resource. Based on the assessment plan, employee able to know what
type of development courses or training it required again the current work
requirements and needs. With such, employee able to identify goals and
strategies to shape the future direction of it is career.
Self assessment and managing own career development would be the initial start
to address the need and development requirement for employee themselves and
able to contribute the knowledge learned and area of expertise to the business
growth. Based on the article by Anne Babej, CPSA stated a constant commitment
to professional development to evolve along with the changing marketplace.
Listed below are the key questions depicted from the article written by Anne
Babel, CPSA believed would help employee to create self development plan:1)

List down your notable skills and abilities?

2)

Identify your key areas of knowledge and understanding?

3)

Assess your level of competency in your current job.

4)

In what areas do you require further skill development?

From the article of Anne Babej, CPSA also highlighted the benefits of having self
development plan created and important in order to reach employee goals.

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1) Identify the competency requirement for the job level you plan to achieve.
What will you need in term of experience, education and attitude?
2) Set goals and time frames for achieving these competencies.
3) List the steps you must take to reach your goals
4) Act dons wait another minute. Put your plan into action.
Employee commitment, contribution and remain focused on organisational
achievements is essential. In this regards, they need to develop a passion and
enthusiasm toward work performance and concerns on the organisation vision
and mission.
2.3. Market Requirements
H3) Current market requirements would indirectly influence in development
of Intellectual Capital of an organisation.
Rapidly change environment and marketplace is an alarm to every employee and
an organisation that it required to constantly update and refresh it existing
knowledge and skills in order to stay competitive.
Knowledge, technology and market behaviors are rapidly changed. All industries
are given and struggle with new innovation in order to ensure their business
sustain health growth. Market challenges would be the biggest impact to an
organisation growth. The main obstacle would be the lack of innovation and
significant business idea comparing with the competitor outside.
The article The business of sustainability: McKinsey Global Survey Result by
Sheila B., October 2011 highlighted that with total 3,203 executive responses
received from online survey conducted from 12-22 July 2011, one of the issue
being highlighted in the article on business sustainability principles is to retaining
and motivating employees. The article stated:

Many companies are actively integrating sustainability principles into their

businesses, according to a recent McKinsey survey,1 and they are doing so by
pursuing goals that go far beyond earlier concern for reputation management
for example, saving energy, developing green products, and retaining and
motivating employees, all of which help companies capture value through growth
and return on capital.
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The following was depicted from the survey conducted by Sheila B., October
2011, the article The business of sustainability: McKinsey Global Survey Result
stated Improving employee retention and/or motivation related to sustainability
activities contribute a significant percentage to an organisation success.

Based on the survey (Sheila B., October 2011) we can conclude that employee
development is vital for business competitive advancement. Most organisations
would foresee that employee motivation being one of the important areas that
would impact the business growth. Nonetheless, there are still other issues that
impact the business sustainability among all employee motivation is one the
matter being addressed in the survey where believed having significant influence
to an organisation and business advancement.
Teece (1997) highlighted that the importance of external resources is highly
important in order to build new capability and contribution to long-term success of
an organisation. Collins and Hitt (2006) agreed and stated that in a changing
competitive environment, the ability to acquire, recognize and successfully absorb

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external knowledge with the firm existing knowledge is especially valuable and it
allows firms to differentiate their goods and services from it competitors.
Learning is facilitated through training and development programs (Bontis, 2009),
it can contribute to human capital by enabling the transfer of knowledge to
individuals or groups of employee (Carson, 2004).
Knowledge of marketing channel and customer relationships is considered to be
extremely important among external resources (Bontis, 1998). The customer
relationship is valuable on the grounds that it can help firms to increase sales,
transfer knowledge and information and reduce costs. Customers may provide
knowledge to a firm and addressed their specific needs that are unknown to
competitors, or information about products and services. Therefore, customer
knowledge and competence providing an opportunity for the firm to create
innovative products and to validate the knowledge accumulated in the
organisation (Gibbert, 2001).
Having competent training and development to deliver high quality products and
services is critical to building customer confidence and goodwill, driving customer
satisfaction, enhancing reputation and ultimately realizing individual corporate
vision and strategic goals which will then translate into revenues to an
organisation.
2.4. Organisation
H4) Organisation strategic plan would determine the level of impotency in
development of intellectual capital.
Organisational learning represents the ability of the organisation to acquire,
create and transfer knowledge and to modify it behaviors to reflect new
knowledge insights (Garvin, 1993). Such knowledge is hard to neither imitate nor
replace because it usually tied with particular characteristics and history of an
organisation and often specific to the organisation (Marti-de-Castro, 2006).
Therefore, it can be concluded that organisation learning is an important source
of future business growth for long-term.
Details organisatonal strategic plan in development of employee competency is
essential. Having intellectual capital only be able to place a candidate at the right

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career path with fully utilise it initial knowledge and skills, subsequent
development based on the employee needs would give an extra benefits to an
organisation. The benefits of employee development would gain employee loyalty
and ideal contribution to organisation sustainability.
Skills development is a long-term processes, employee would much welcome
and appreciate such training being in place. Unfortunately most of the
organisations tend to ignore this. The Article Why Top Young Mangers Are in a
Nonstop Jon Hunt by Monika Hamori, Jie Cao and Burak Koyuncu descried that
more than 1200 employees being interviewed face-to-face and discovered that
many not receiving they career development support. The article stated:
Dissatisfaction with some employee-development efforts appears to fuel many
early exits. We asked young managers what their employers do to help them
grow in their jobs and what theyd like their employers to do, and found some
large gaps. Workers reported that companies generally satisfy their needs for onthe-job development and that they value these opportunities, which include highvisibility positions and significant increases in responsibility. But theyre not
getting much in the way of formal development, such as training, mentoring, and
coachingthings they also value highly.
Based on the responses given, we can concluded that every employee would
highly appreciate and value the effort in employee development programmed
given and arranged by an organisation.
In most financial industry in Malaysia, training and development being their main
focus and ensure all level of employee received an adequate learning opportunity
and training. Organisation value employee being their biggest asset, hence the
development in intellectual capital being part of their strategic goals.
Table below are information extracted from CIMB Group of Malaysia
Sustainability and Corporate Responsibility Report year 2013, 2012 and 2011 on
section in relation to staff Training and Development in Malaysia. The average
numbers of hours are increased to 37 in year 2013 for Non-executive. From that,
we can conclude that staff competency is focus on employees who are nonuniversity graduate and intensive training to be provided compared to employees
with higher education background.

Page 20 of 59

CIMB values innovation and high-performance, as such, it invests significantly in

developing its people. The talent management process has in CIMB that can
support the growth of leaders with distinctive skills, qualities and competencies to
supports its businesses in difference geographies.

(Data extracted from CIMB Group, Sustainability Report 2013, p057)

(Data extracted from CIMB Group, Corporate Responsibility Report 2012, p037)

(Data extracted from CIMB Group, Corporate Responsibility Report 2011, p059)

Page 21 of 59

Investment in Staff Training and Development

Year (in RM Million)
Bank

2011

2012

2013

2014

CIMB Bank

60.00

63.20

70.00

84.90

Maybank

84.90

100.00

118.87

120.00

Public Bank

28.70

34.00

34.00

38.90

(Source: CIMB, Maybank and Public Bank Sustainability report year 2011-2014)
The above are the information extracted from CIMB Group, Maybank Group and
Public Bank Group of Malaysia Sustainability Report from year 2011 to 2014. The
figures reported for group learning budget utilization on staff training and
development. The utilization amounts increased yearly, the execution of
intellectual capital development believed able to develop high potential
employees and their support in businesses.
CIMB Group, Maybank Group and Public Group currently ranked the top 3
Banking Institutions in Malaysia and the total investment in staff training and
development explained their focus and attention in developing human capital as
being the top 3 leading Banking Institutions in Malaysia.
The average learning hours and learning budget allocation explained the level of
impotency and consideration of intellectual capital as tools for an organisation
success. With such, we can concluded that, and most organisation believed
having investment in human capital development would ultimately developed
employee loyalty as well business growth and success.
One of the notable phenomenon growths in the professional services industry
currently and the Kelly services recruitment agency (2013) reported that most
new graduates and MBA recruits no longer find as many in manufacturing
companies as previous while graduates secure positions with management
consultants, accounting firms, investment banks, law firms or large corporate
companies. The constants requirement found in each of these positions is the
importance of intellectual capital.
Organisation that recognize the inherent and crucial value of their employees will
be miles ahead of those organisation that fail to recognize this imperative

Page 22 of 59

intangible asset. Additionally, effectively managing human capital will make all the
differences in the market value and success of the organisation as its most
valuable asset (Stewart, 2001). This explained why most graduates decide to
attach and joining large organisation due to the progressive training and
development program designed for their people.
2.5. Financial Growth
H5) The attribution of Human Resource, Employee, Market Requirements
and Organisation having significant impact toward Financial Growth in
Financial Industry in Malaysia.
According to Bueno (1998) intellectual capital is knowledge that can be exploited
for some money-making or other useful purpose. The term combines the idea of
the intellect or brain-power with the economic concept of capital, the saving of
entitled benefits so that they can be invested to produced more goods and
services. Sullivan agreed with the statement quoted and defined that intellectual
capital is knowledge where it can be converted into profit (Sullivan, 2000).
There are lots of debate and dialogue in the literature on the classification of
different components of intellectual capital (Kaplan and Norton, 1992). Ross and
Ross (1997) assert that there are two general categories of intellectual capital
which 1) intangible assets that belong to organisation members (human capital)
and 2) those belong to an organisation (organizational capital).
Accordingly, revision of relative literature on intellectual capital there is consensus
in identified human capital as knowledge, skills, capabilities and talents of all
individuals associated with an organisation.
Reichheld (1996) stated that in some organisation, productivity gains never
translate into cash-flow, because employees harvest the gains for themselves, in
other words, human capital is not transformed into organizational capital.
Reichheld (1996) further emphasized that, the key to quantifying the cash-flow
consequences of human capital is to recognize that employee retention is not
only critical for cost efficiency and important factor in revenue growth as well, the
direct linkage in between customer acquisition and retention. Therefore, in normal
conditions cash-flow is another outcome of using related knowledge which
belongs to different agents correctly.

Page 23 of 59

In fact, the very reason that organisation exist is to maximise value per share,
maximise return on capital by using sophisticated measurement tools such as
Internal Rate of Return (IRR) on project investment. If an organisation adopts
programs only to focus on such while neglected on other resources, ultimately the
revenue growth in long term will decrease gradually in view of the in-effectiveness
utilization on human capital into business activity.
Intellectual capital is a concept that plays a vital role for an organisation. In
addition, it generates and increase company value added. Developing intellectual
capital is the sum of four main components Human Resource, Employee, Market
Requirement and Organisation. All these parts and elements are important
factors and affect company value added.
The financial growth in developing intellectual capital in financial industry in
Malaysia is crucial and can be measured by the business activities involved.
Ultimately, new product development, implement and launch into the market
require strong support from human capital and knowledge as a backbone in order
to achieve greater success and lastly generate revenues for an organisation.
The growing shown in traditional financial reporting is inadequate to meet
stakeholder expectations, particularly on knowledge economy characterized by
emerging market, such information is not documented and disclose and such
information is essential in order for stakeholder to fully understand the company
future wealth creation capabilities. (Huang, C.C, Abidin, 2008)
The investment amounts allocated and programs designed toward people within
an organisation, the effective utilization of people knowledge and skills into the
right field, the right resources apply and used by an organisation, the global
financial standards, economic crisis challenges, and corporate governance policy
all these determined the success of an organisation in the financial industry in
Malaysia.
The impact of global financial crisis in year 2000 affects Financial Industry in
Malaysia that gave the challenge and awareness such that a constant
development in intellectual capital is vital beside revenues. Financial industry
being the leading industry toward Malaysia economic realized that financial

Page 24 of 59

knowledge and management skill of an employee in address the issue of

economic crisis that will eventually helping and organisation to overcome those
challenges it would faced.
The monitoring of intellectual capital development in financial industry believes
that difficult. In view the currently courses and seminar ogranised by external
agency may not be able to address and meet the requirement of Malaysian
financial industry, thus, the collaboration of IBBM (Institute Bank-Bank Malaysia)
in designing and offering relevant management and technical programs to meet
the current and future needs of the financial industry. In addition, the framework
would address the discrepancy by providing the most up-to-date training material
and made it compulsory to be attended by banking professions before allowing
them to represent the established banking relationship with corporate customer.
Such initiative providing a standard platform to be adhered by all banking
professions, and also a measurement guides in Financial Industry.
The financial industry will remain the pillar of Malaysia financial system, as it
evolves to offer more innovative financial solutions to meet the changing needs of
the economy. Financial industry is a knowledge-intensive, skills-based and
relationship-rich industry. The competitiveness of financial industry will depend
critically on the quality of human intellectual capital and the extend to which the
industry is able to leverage on these talents.
To compete effectively, financial industry needs professionals with the requisite
skills and expertise not only at the strategic and management level but also at the
technical and operational level. Lifelong learning and continuous enhancement of
human capital is becoming increasingly important in this knowledge-based
economy where knowledge and skills of need to be continuously updated and
upgraded.

At the macro-level, the breadth and depth of skills of the entire

financial service workforce will increasingly be the defining factor in determining

the success in building a more efficient, effective and dynamic financial sector.
The availability of appropriately trained and competent human resources is a
critical factor key to support the performance of the industry. In essence,
continuous strengthening of intellectual resources and capabilities must be made
to create a larger pool of talents and high caliber professionals in the banking and
finance industry.

Page 25 of 59

The quality of human capital will increasingly become the cutting edge of
competitiveness. Having competent staff to deliver high quality products and
services is critical to building customer confidence and goodwill, driving customer
satisfaction, enhancing reputation, and ultimately realizing your corporate vision
and strategic goals.
With rapid changes taking place in the financial landscape and more challenging
environment, the need to build a competent human capital base with high
integrity, right attitudes and work ethics, as well as to maintain a learning
environment and efforts to building human intellectual capital in a continuous
cycle of competency development and enhancement (Dr Zeti, 2005).
Financial Reporting Context of Intellectual Capital
Reporting disclosure in particular, the traditional accounting methods have lost it
value and relevance over time due to the increased importance of intangible not
recognized as assets under current account standards. Changing economy
value, wealth often derived from the creation and use of intellectual capital and
not from the management of tangible physical assets (Canibano, 2000).
This is valid as stated by Garcia-Ayuso (2003) that the failure of the traditional
accounting rules to account for intangible assets to be the driving force behind
the difference between the market value of an organisation and their book value.
This would caused by the fact that the costs of acquiring internally-generated
intangible assets are expensed as incurred in an understatement of current
earnings and book value.
This has result in the assertion that the increasing gap between market value and
book value is evidence that the traditional financial accounting framework
presents an incomplete picture of the organisation value as mentioned by Guthrie
& Yongvanich (2004). The recognition of the difference between organisation
market value and book value can be attributable to organisation intellectual
capital or intangible assets (Brennan & Connell, 2000). Consequences,
Roslender & Fincham (2001) suggested that, the more reliant an organisation
becomes on its stock of intellectual capital, the less use its financial accounting
and reporting procedures are for reporting the health of the enterprise.

Page 26 of 59

Professional Accounting Association has recognized the inadequate of the current

method of accounting for intangible assets and intellectual capital. The Financial
Accounting and Management Accounting Committee of the International
Federation of Accountant concluded that the current accounting model does
not adequately capture the value of intangible assets nor represent them in a
concise, meaningful format (IFAC, 1998). The statement further ascertained by
The Chartered Institute of Management Accountants that all drivers of
performance and value should be provided to investors including the nonfinancial items such as intangible assets (Marr, 2003).
The Financial Accounting Standards Boards suggested through encouraging
businesses to voluntarily disclose information regarding their intangibles and
intellectual capital (FASB, 2001). The FASB (2001) highlighted that, organisation
is recommended to disclose their intangible assets and it would provide more
transparency and promote greater understanding among investors. In recognition
to the increasing importance of intangible assets, FASB (2001) encouraged
organisation to voluntarily disclose information about intangible assets that have
not been recognized in the financial statement so far.
The Malaysian Context of Intellectual Capital
Under the purview of Accounting Standards in Malaysia, the Malaysian
Accounting Standards Board (MASB) and the Financial Reporting Foundations
(FRF) and the Financial Reporting Act 1997, the act set out the first formal
framework for Malaysia and no particular discussion stated on the mandatory
reporting of Intellectual Capital and disclosure requirement. However, the new
Financial Reporting Standards (FRS138) stipulated clearly that of mandatory
intellectual capital reporting in Malaysia on intangible assets which forms part of
the General Accepted Accounting Principles. However, the amount of Intellectual
Capital is not captured in the balance sheet and it is limited to the items that are
objectively measurable. In Malaysia the disclosure of intellectual capital is
voluntary. Therefore the decision to reveal organisation intellectual capital is at
the discretion of firm management.
Despite the financial reporting system in Malaysia on Intellectual Capital is on
voluntary basis, the intellectual capital in creating value-add to an organisation is
proven stated by researchers and scholars.

Page 27 of 59

CHAPTER 3: RESEARCH METHODOLOGY

3. Research Methodology
Research methodology referring to the approach adopted to the research
processes. The debate in the quantitative and qualitative methodology would be
selected or with the combination of both dimension. Creswell (2003) defined
quantitative approach as one in which the investigator primarily uses post
positivist claims for developing knowledge (i.e. cause and effect thinking,
reduction to specific variables and hypotheses and questions, use of
measurement and observation, and the test of theories), employs strategies
inquiry such as experiments and surveys, and collects data on predetermined
instruments that yield statistical data..
Therefore, should quantitative approach chosen by researcher, it will emphasize
quantitative in the collection and data analysis. The focus would dominant to the
theory or hypotheses development rather to assess the relationship between
theory and research. Large sample and data is collected in highly precise and
specific where results from a representative sample can be generalized to the
population (Collis and Hussey, 2003, Bryman, 2004).
Contrast, under the qualitative approach it aims to generate theories by
employing an inductive approach and stated that there is a fundamental
difference between the social areas and natural (Smith and Heshusius, 1986),
and emphasis on individual interpretations to their social world is prefer (Bryman,
2004). The major different of qualitative approach against quantitative approach
is the method using small samplers and subjective data (Collis and Hussey,
2003).
3.1. The Methodology Adopted in This Thesis
The methodology choice in this thesis is to use the mixed methods where the
quantitative and qualitative is combined together to support this research study.
Mixed methods approach by definition is the type of research in which a
researcher or team of researchers combined elements of qualitative and
quantitative research approaches (e.g. use of qualitative and quantitative
viewpoints, data collection, analysis, inference techniques) for the broad
purposes of breadth and depth of understanding and corroboration as mentioned
by Johnson (2007). The approach is argued being the most informative,
Page 28 of 59

balanced, useful and complete research results and be intellectual and practical
(Johnson, 2007).
3.2. Mixed Approach Research: Quantitative and Qualitative Approaches
The main objective of this research study is to review the financial growth in
developing intellectual capital for the financial industry in Malaysia. In view of
limited research in intangible assets, there is a common understanding that the
intangibles might refer to the knowledge-based resource of a firm (Kristandl and
Bontis, 2007). By taking into account, knowledge would be more reality that can
be measure as numbers and observable. However the question is would it
possible that knowledge be represented on the basis of its physical
characteristic? Obviously, knowledge is something relates to human behaviours,
culture

rather

than

physical

characteristics.

Indeed,

intellectual

capital

measurement is an important purpose of this research. Therefore, in this context,

the following will be studies or collectively assess in order to support this research
study.
1) Organisation vision and mission statement and culture.
2) The financial statement and sustainability report published. The total amounts
invested in human capital development and training.
The

variables

Human

Resource,

Employee,

Market

Requirement

and

Organisation would be jointly to evaluate the significant impact by reviewing the

organisation vision and mission statement and cultures. The approach was
chosen is to review and highlight the importance of intellectual capital toward
financial industry in Malaysia. Employee classified as the main and prime
resource to a financial institutions, inadequate training and knowledge may result
failure in operational processes of an organisation. Conversely, the knowledge
acquired by an employee would then be transform into operation revenues and
the end beneficial would be organisation itself. Hence, staff training and
development becoming a vital assignment of an organisation to ensure in longterm business sustainability.
The Organisation vision and mission statement and culture explained the
sustainability competitive advantage of an organisation by identifying the internal
resources and capabilities through compete it competitors. The identification of
internal resources will distinguished them from others in excellence should an
organisation able to adopt and fully utilized into business activities. In view of

Page 29 of 59

Financial industry is a challenging sector as it providing financial needs to

corporate, every bankers carrying the firm name should be well trained and
developed as it representing the firm to establish business relationship with
customer. The negative feedback from customer seriously affect the firm
reputation especially in this challenging environment where customer having
multiple selection to establish business relationship with. The development in
Intellectual Capital in an organisation is essential and is an on-going initiative by
an organisation for greater benefits in long-term growth.
The second area of assessment in financial data analysis extracted from firm
annual report published for Net Profit, Earning per Share (EPS), Gross Dividend
per Share (GDPS) and finally the funds invested for staff development and
training. The index indicates the profitability level of an organisation to its
shareholder as well as to attract more investment from investor outside. The
funds allocation increased by year explained the firm initiative and attention on
intellectual capital development. Financial industry requires talent to run their dayto-day businesses, knowledge and soft-skills development is essential in order to
meet market requirements as well as customer satisfactions. The excellence
services would increase profitability index of an organisation.
3.3. Research Design and Questions
Financial institution in Malaysia is the main focus entity for this research paper.
The products innovation and excellence services impact the success of banking
businesses. Financial industry explicitly banking is highly regulated industry and
knowledge-intensive since reliance on high intellectual capital and information
technology.
CIMB Group, Maybank Group and Public Group are financial institutions chosen
to review the financial growth in developing of intellectual capital for financial
industry in Malaysia. The main reason being selected due it present status in
Financial Industry and the top 3 leading Banking Institutions in Malaysia.
As noted early, this research study is adopted mixed methodology, the following
being assess to further ascertain the H1 to H5 defined in conceptual model and to
provide a competency framework in sharpening competencies of staff and
orgnisational capabilities to meet future challenges and business growth.

Page 30 of 59

Step 1: Review each financial institutions vision and mission in relation to

Human Capital and Intellectual Capital development.
Step 2: Review the financial institutions financial and sustainability reports from
year 2011 to 2014.
Step 3: Identifying the staff training and development cost recorded in the
financial report.
Step 4: The profitability level of an organisation based on Net Profit generated,
Earning per Share (EPS) and Gross Dividend Per Share (GDPS) having
significant relationship from human capital development.
The identification of research method have made this research study more
significant and persuasive on the issue of importance in developing intellectual
capital in Financial Industry with the actual data collected from respective
financial institutions. The organisation vision and mission statement, human
capital management, recruitment and identifying the potential employee for
businesses growth. This having significant impact toward organisation success as
well as future status of financial industry in Malaysia.
The main research question of this research study is How do intellectual capitals
relate to and affect bank financial performance? This question is to construct
prior understanding and further explore the important of developing intellectual
capital that defined in the conceptual model: Human Resource, Employee,
Market Requirement and Organisation. Data is collected from sources available
published by respective financial institution and bank websites (e.g annual
report), Organisation vision and mission statement and cultures, Management of
human capital by Human resource. Finally, the associations of these affect the
bank financial performance. As defined earlier, this research study is adopting
mixed methodology where the areas of assessment are break into qualitative
approach (Human Resource, Employee, Market Requirement and Organisation)
and quantitative approach (annual report).
The question will contribute an empirical evidence and disclosure where the bank
manager, human resource personnel on their perception relates to intellectual
capital development, expectations and relationship toward organisation growth
and financial performance on the communication between them.

Page 31 of 59

3.4. Analytical Methods and Techniques

Based on the research design defined, the research will review and analyse
based on the three main sources 1) The identification and developing potential
employees and their impact toward business growth with adoption of RBV model
and 2) Utilisation recorded in by respective financial institutions published in The
Sustainability Report and 3) The analysis on Net Profit, EPS and GDPS of an
organisation to see the effect of human capital development from year 2011 to
2014.
a) Organisation Vision and Mission Statement and Culture
The methodology and process identifying the internal resources and strength to
compete with the external competitors and emphasize the culture, services and
unique quality of an organisation, hence made it outstand among others in the
same business industry. Through the same corporate statement convey across
within an organisation, employee and management would have a clear objectives
and mission to achieve and growth together with the organisation to another great
milestone.
CIMB, Maybank and Public Group will be individually access and highlight their
respective vision and mission statement, operations culture, recruitment
strategies and human capital management in address the issue of human capital
utilisation and development through achieve the business growth and competitive
advantage in financial industry in Malaysia.
b) Utilisation in Human Capital Development by on Organisation
The data will be extracted from respective financial institutions sustainability
report published from year 2011 to 2014 for evaluation purposes. Data organized
into 1) Investment in staff training and development, 2) Number of employee; and
3) Operating profitability.
Investment in staff training and development will assure the business growth and
success. Most of the employee willing to contribute their innovative idea upon
knowledge acquired while organisation success required change and new
innovative ideas contributed by employee whom face to operations challenge
daily in order to align with current market requirements as well as sustainability of
an organisation in long-term.

Page 32 of 59

The number of employee is to ensure the organisation having sufficient

manpower to run business as usual. The growing and business expansion
requires resources and money, insufficient any of these would result in delay and
failure of a profitable project. Manpower management is crucial in maximise the
utilisation of human capital by an organisation. Management skills apply correctly
would benefits toward an organisation growth while in wrong method may result
in staff turnover, hence soft skills development is essential to facilitate
effectiveness in management.
The profitability level of an organisation indicated the investment return to its
stakeholder as well as shareholder. The Net Profit, EPS and GDPS measure the
value of benefits for every dollar investment. The higher the ratios of Net Profit,
EPS and GDPS indicated the more attractive the business in eye of investor.
Ultimately, investor concern is the returns on every dollar invested.
3.5. The Validity of the Analytical Techniques and Approaches
With regard to this study, the overall procedures of this study highlighted 4 major
important types of variables Human Resources, Employee, Market Requirements
and Organisation of decisions made that affect and having direct impact toward
financial growth of the financial industry in Malaysia. The underlying assumptions
were addressed in the fields of management and accounting for the combination
to review the same phenomenon which is the financial growth of the industry.
Although consideration effort has been devoted to enhance the validity of this
study, there are some weaknesses and limitations exist in this study. The possible
limitations and weaknesses include lack of solid fundamental framework and the
barriers to assimilate the analyzing data collected. The data collected is mainly
extracted from the financial statement and the complexity of accounting basis
adopted by firm is different to others and is made unknown to public. In addition,
the data collected is mainly gathered financial statement published and there is
no interview conducted to fully understand the firm direction on human capital
framework.
However, every research method and approaches adopted has strengths and
weaknesses. Due to the time constrain, and to made this research more
comprehensive, conducting more interviews as possible is mandatory to make
this research even solid.

Page 33 of 59

Overall, by explaining explicitly the research design, purposes, techniques gain

enriched and understanding of the value added and creation process of
intellectual capital toward financial growth of an organisation.
3.6. Contribution of This Research Study
This research study is expected to be benefits in contributing the knowledge and
literature in fields of management and finance by providing a practical examples
of how important in developing intellectual capitals affect the bank financial
performance in used of mixed methodology and noted not a popular approach so
far as mentioned by Molina-Azorin (2011) in her findings that most journals
publicly available in strategic and financial management research are dominant to
quantitative approach and mixed approach has not been widely applied due to
absence of exemplars (Woolley, 2009). Hope this research study able to provide
an example in which the quantitative and qualitative approach can be applied
concurrently and integrated in at all stages of the project and information
collected from such is mutually informative (Bryman, 2007).
This research study may benefits to manufacturing industry that intellectual
capital development should be focus and having equal attention level as financial
industry. The employee competency level would direct and indirectly affect the
organisation performance and business growth. Knowledge is the key driver to
the business success (Clulow, 2003), business operations supported by people,
people supported by knowledge and soft skills factors (Grant, 1991). Employment
of skilled personnel has become one of the most importance in strategic
management and be adopted by firm in order to achieve the competitive
advantage and business growth long-term (Barney, 1991).
Further, hope this research study will offer a new insight into bank value creation,
showing how knowledge and financial resources provides means to improve the
financial growth of the financial industry in Malaysia. It will also provide evidences
on the importance of management intellectual capital to bank performance and
the environmental changes that influence the bank business performance and
growth in long-term.

Page 34 of 59

CHAPTER 4: ANALYSIS OF DATA AND FINDINGS

4. Analysis of Data and Findings
4.1. Hypothesis H1 to H4
To test the H1 to H4, the study review the organisation vision and mission
statement, culture to further ascertain the H1 to H4 having significant relationship
in developing intellectual capital in financial industry in Malaysia. The organisation
success is highly depend on a clear corporate statement and understood by
every employee and management within an organisation. The basis achievement
and expectation by an organisation is clearly communicated from top to bottom
with corporate statement in common.
As for a long-term business strategy to financial industry and banking in specific,
vision and mission statement formulate the core direction of an organisation to it
employee as well as community. All financial institution has it own vision and
mission statement that made it unique and difference to others. This is the main
principle for an organisation to operate their business daily.
CIMB, Maybank and Public group formed their own part of philosophy statements
to support their organisation aspirations to create a profitable and respected
premier financial institution in Malaysia. Their philosophy statements are:1) CIMB group
Vision

: To be the leading ASEAN company

Mission

: To provide universal banking services as a high performing,

institutionalized and integrated company located in ASEAN and key markets

beyond, and to champion the accelerated of ASEAN integration and the
regions link to the rest of the world.
Core Value : The beliefs that guide our actions as we pursue our vision.
Customer-centric, High performance, Enabling people,
Strength in Diversity, Integrity.
(CIMB sustainability report, 2014)
2) Maybank group
Vision

: To be a Regional Financial Services Leader

Mission

: Humanising Financial Services Across Asia

Core Value : T - teamwork

I - integrity

Page 35 of 59

G - Growth
E - excellence & efficiency
R - relationship building
(Maybank sustainability report 2014)
3) Public group
Corporate Philosophy: Public bank cares for its Customer, Employees,
Shareholders and Community it serves with Integrity
Mission: To sustain the position of being the most efficient, profitable and
respected premier financial institution in Malaysia.
(Public sustainability report, 2014)
Clear vision, mission and core value statement of an organisation would helps in
creating clear direction and commitment across employee in an organsation and
achieving strategic objectives while delivering the promise and differentiates itself
from its competitors outside. This will enable them to construct it unique culture
and human capital development to further strengthen it present status in this
industry.
Developing intellectual capital is an irreplaceable component in defining an
organisation culture to support the innovation, market adaptation and employee
engagement for success. The ability of an organisation to identifying the high
potential employees internally to develop their skill set and leadership capabilities
which will enable them to constantly drive the right behaviours across the
organisation to achieve long term outcomes. Future leader couple with excellence
leadership skills is not born naturally or in an overnight basis, it requires to
undergo a series of development program or through accumulate real-life
experiences to hone their leadership skills. These can be addressed and
objectives met quickly and efficiently with support from organisation corporate
development strategy where aim to train and build caliber leaders to meet current
and future business needs.
Strengthening organisational structure by identifying potential talents internally is
the main key theory of Resource-Based View methodology, CIMB, Maybank and
Public Group main philosophy is to develop intellectual capital with complete and
robust development program matrix designed and address the issue of human
capital development. Business growth and success need talents and technology,

Page 36 of 59

operational efficiency and service excellence need people, people is the most
valuable asset toward organisation. Strong corporate cultures of diversity create
distinctiveness and inimitability of firm for long-term sustainability.
Beside, an effective human resources policy monitors the rights and needs of
employees along with their talent and qualifications. It defines the frameworks for
efficient deployment of personnel and the optimal performance of employees
through high motivation and job satisfaction.
Effective

communication

with

employees

to

promote

understanding

of

management decision and rationale and simultaneously helps management

understand current issues employee facing and formulate an effective approach
in resolving differences exist.
As explained, employee classified as an intangible asset in financial term and an
importance asset to an organisation, understanding organisation culture and
corporate mission statement is mandatory to build a mutual understanding in
order to growth along with organisation. One thing in common, most human
resource personnel would employ the right role, right people and right time for the
financial institutions always as their prime talent sourcing strategic in business as
it is the first step to actualizing success.
Thus, the results of the hypothesis H1 to H4 are having significant relationship
toward developing intellectual capital of the financial industry.
4.2. Hypothesis H5
The second test is used of financial data to substantiate the H1 to H4 that
contribute to financial growth of the financial industry in Malaysia. The utilization
of manpower effectively would increase the capability of profit generation and
earning per share will increase simultaneously and otherwise. Profitable
organisation will declare dividend to all shareholder as a return to the profit
increase during the fiscal year, the highest dividend payout showed the ability to
generate income from business operations of an organisation.
The importance of human capital development explained based on the
incremental in total utilized amounts from year 2011 to 2014 gradually by CIMB,
Maybank and Public Group being the top 3 financial institutions in Malaysia.

Page 37 of 59

1) Investment in Staff Training and Development

Year (in RM Million)
Bank

2011

2012

2013

2014

CIMB Bank

60.00

63.20

70.00

84.90

Maybank

84.90

100.00

118.87

120.00

Public Bank

28.70

34.00

34.00

38.90

Increase %
Bank

2011

2012

2013

2014

CIMB Bank

53.85

5.33

10.76

21.29

Maybank

(24.55)

17.79

18.87

0.95

Public Bank

10.81

18.47

14.41

In year 2014, investment by respective institutions of Maybank RM120 million

comprises of 0.95% followed by CIMB of RM84.9 million represented by 21.29%
increased and Public Bank recorded as RM38.90 million or 14.41% increased.
The huge investment sums by Maybank mainly due to the number of employee
more than 47,000 and maintaining it marketplace status in financial industry.
Apparently, Maybank ranked no 1 by market capitalization by Bursa Malaysia
Securities Berhad in Financial Industry (Maybank, 2014).

Page 38 of 59

The consistent financial performance, prudent achievement and unbroken record

of profitability are the organisations commitment to continuously deliver return on
investment to their shareholders. Striving to provide excellence financial result
requires integrated efforts from employees to execute and operate the task in
order to meet their expectations and deliver the promises well.
Invest significant resources to empower the employee with tools they need to
deliver and helping the organisation in delivering continuous and sustainable
returns despite facing intense business competition, challenges and changes in
the operating environment.

2) Number of Employees
Year
Bank

2011

2012

2013

2014

CIMB Bank

40,244

41,993

40,808

41,669

Maybank

45,000

47,000

47,771

47,000

Public Bank

17,511

17,625

17,924

18,198

The number of staff recruited as of the financial year by respective institutions.

Human capital is the most significant asset toward an organisation growth and
success. Adequate human resources in line with businesses growth and
development always an issue faced by an organisation to maintain it
marketplace especially in highly regulated industry. Maybank being the key

Page 39 of 59

player in financial industry recorded the highest number of employees of 47,000

in year 2014.

3) Operating Profitability
Year (in RM Million)
Bank

2011

2012

2013

2014

CIMB Bank

4,031

4,345

4,540

3,107

Maybank

4,450

5,750

6,550

6,720

Public Bank

3,684

3,827

4,065

4,519

Increase %
Bank

2011

2012

2013

2014

CIMB Bank

15.14

7.79

4.49

(31.56)

Maybank

16.49

29.21

13.91

2.60

Public Bank

20.86

3.88

6.22

11.17

Indirectly, the investment in human capital development would contribute benefits

toward financial growth in profitability of an organisation. Noticeable profit
achievement by respective institutions are generally increased from year 2011 to
2014 except CIMB dropped by 31.56% recorded as RM3,107 million in year
2014. Decreased was mainly due to acquisition and operations losses generated
by CIMB Niaga, Indonesia. However, this indicated that, the human capital
development is vital for an organisation and identifying potential employee in
focus growing attention is still needed and on-going in order to further strengthen

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the corporate structure of an organsation for greater success and business

growth.
Market requirement also an indication to an organisation on the current and future
market direction, whether on how to penetrate into this segment will rely heavily
the sensitivity of the bankers prediction. Success of such depending on the
innovation mind and strategy plan to penetrate into this new development area.
Market training and financial outlook seminar is the periodic financial talks
organized by professional bankers to address the current and future market
direction and will eventually benefits toward organisation should the said courses
being closely followed by all bankers. Although the seminar is costly but the
ultimate benefits is proven. Should it be the first to benefit or last to enjoy is at the
discretion of the organisation.

4) Earnings per Share (EPS)

cent
Bank

2011

2012

2013

2014

CIMB Bank

54.20

58.50

60.00

37.50

Maybank

61.40

72.70

75.80

74.20

105.20

109.30

116.10

123.70

Public Bank

5) Gross Dividend per Share (GDPS)

cent
Bank

2011

2012

2013

2014

CIMB Bank

22.00

23.38

23.15

15.00

Maybank

60.00

65.00

53.50

57.00

Public Bank

48.00

50.00

52.00

54.00

The earning per share (EPS) and Gross dividend per share (GDPS) declared in
respective fiscal periods given a positive investment outlook performance to it
shareholders. High EPS and constant dividend payout would increase investor
confident over investment in respective organisation. Based on the EPS and
GDPS table showed above, we can conclude that, although CIMB group having
slightly decreased in net profit and EPS but constant GDPS payout during the
year, in overall financial performance remain positive and at the satisfactory level.
The EPS increase would indicate the ability of an organisation to attract more
investor invest over it organisation, this could be due to several reasons and the

Page 41 of 59

main caused of the corporate culture and effectiveness in managing in business

operations. Employees and technologies are the strong support to execute the
business plan and investment project.
The mismanagement would lead to business failure while robust management
style would help in profit generation. This showed in the financial statement
published and often be the investor focus before investment comments. Of which,
Net Profit, Earnings per Share (EPS) and Gross Dividend per Share (GDPS) be
the first to observe by most investor and subsequently is the organisation vision
and mission statement and corporate culture on how it operates and conduct it
businesses.
Funds utilised in staff development and training be the last review by investor on
how critical such organisation in building human intellectual capital in a
continuous cycle of employee competency development and enhancement. The
financial institutions to ensure that the competence and professionalism of staff in
their industry is further strengthened in order to deliver high quality services and
building customer confidence,
The second hypothesis testing of H5 is valid and showed that in developing
intellectual capital is vital for financial industry in Malaysia. Through, human
capital sits at the core of business strategy and developing intellectual capital is
closely related to financial growth of the financial industry in Malaysia and
organisation success.
Employee learning and development is an investment for the future. Learning and
development are attention to ensure employees are equipped with the right
knowledge, confidence, capability and skills to excel. It enables the employees to
be efficient and productive, manage risk and sustain profitability.
4.3. The Importance of Intellectual Capital Development in the Financial
Industry
Garcia-Ayuso (2003) noted that intellectual capitals are important sources of
competitive advantages in most industries and agreed by most researchers and
scholars. In the banking industry, a highly regulated and knowledge intensive
industry, intellectual capital found to be extremely important for wealth creation
(Curado, 2008; Mavridis, 2004).

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The answer of the above can be certain by way of question defined in Chapter 3
that is: How do intellectual capitals relate to and affect bank financial
performance, majority of the bankers are given the same and similar answers
when being interviewed as bank rely heavily on human capital as their main
resources in providing services to customer for instance payment services,
banking products, customer satisfaction that all are adequate with knowledge.
you might know that banks have no product specialization, all products offered
are normal for every bank. The new product offered today, few days later it would
be available and offer at other banks the same product. The question is why
customer selecting this bank and not others? The main factor made the customer
doing such is the service quality, consistency of the services, products knowledge
and the way the customer being treat. (Interview with Bank Manager X)
The bank manager X explained the importance of services quality and customer
satisfaction having significant affect for their business success. He also
highlighted on the financial and other industry differences that will further remark
the importance of intellectual capital in financial industry.
unlike manufacturing, banks is a service oriental industry, customers are buying
things from banks because of how the management are working in that bank,
and buying the safety guide to protect their money and buying things on how we
grow business and provide credit. (Interview with Bank Manager Y)
There are managers emphasized that the importance of balancing Human,
Structural and Relational Capitals that would achieve their desire business
success. The statement further accomplished the role of Human Resource,
Employee, Market Requirement and Oganisation could achieve a high level of
profitability. The manager further stressed that all these relationships were
important for business success and long term sustainability.
The combination of Human, Structural and Relational capitals are needed once
you get it wrong you will lose and I dont believe company only focus on one
because it is very easy to have a loyal customers, but if the business model is to
expensive, you cant generate income. Ultimately you cant continue to provide a

Page 43 of 59

great service to your customer because you are just not efficient enough. So you
have to do it all three concurrently (Interview with Bank Manager Z)
It can seen that, the Bank manager agreed and recognized the effort that the
intellectual capital helped to improve employee skill factors and allowing them to
provide appropriate service to customer and meet customer demands and
satisfaction. Ultimately, such satisfaction would convert into revenue of a firm.
4.4. The Relationships between Intellectual Capital and Financial
Performance
The literature has provided the empirical evidence that the human capital and firm
performance associated at both top management level and employee level.
Bailey and Helfat (2003) highlighted that, top management human capital, CEO
for instant, has an impact on firm performance, superior managerial skills
developed from education and work experiences are profitable for the
organisation. However, Holbrrok (2000) argue that previous experience and
knowledge can affect an organisation success or failure.
The employee level of human capital, investment in training and development
and staff cost, having significant affect to firm performance as mentioned by Fey
(2000), in which employee skills and knowledge will effect the creativity,
discretionary effort and productivity of the work force and it will turn improve the
organisation operating performance. In particular Financial Industry sector,
human capital has an important impact on the quality and services as well as
revenues generated from banking activities, thus it is positively relate to the
financial industry performance. Therefore the hypothesis below having impact of
financial growth in developing intellectual capital of the financial industry
performance:
H1:

Human Resource is responsible to manage Intellectual Capital and

competency of every employee in the organisation.

H2:

Employee career path and future development should be managed

by themselves and Human Resource as motivator to create employee
motivation.

H3:

Current

market

requirement

would

directly

influence

the

development of Intellectual Capital of an organisation.

H4:

Organisations strategy plan would determine the level of impotency

in development of Intellectual Capital.

Page 44 of 59

H5:

The

attribution

of

Human

Resource,

Employee,

Market

Requirements and Organisation having significant impact toward

Financial Growth in Financial Industry in Malaysia.
As noted, the H1 to H4 concern on the development of Intellectual capital within
an organisation and H5 on financial growth and performance respectively. More
importantly, the combination of H1 to H4 can make H5 more contribution to robust
organisation performance than they work individually. Kaplan and Nortan (2004)
argue that organisation performance indirectly affected through their interactions
of intangible assets. In fact, intangibles assets by themselves are of little value
but when combining with other resources that will create value for an
organisation. The statement further confirmed by Castanias and Helfat (1991,
2001) that top management skill has the potential to create competitive
advantage for a firm by combining with assets and capabilities.
In summary, the discussion and interviewed conducted on how manager
response and answered the question How do intellectual capitals relate to and
affect bank financial performance is clearly stated the importance of developing
intellectual capital in financial industry to increase customer base and meet
customer satisfaction in order to generate revenues and achieve high level of
profitability for an organisation.
Consequently, based on the data analysis above, it can be concluded that, the
variables defined in conceptual model and hypothesis H1 to H5 are having
significant relationship and impact for financial growth in developing intellectual
capital of the financial industry in Malaysia.

Page 45 of 59

CHAPTER 5: RECOMMENDATION, LIMITATIONS AND CONCLUSION

5. Recommendations, Limitations and Conclusion
5.1. Summary of the Research Study
This research study is to investigate the role of Human Resource, Employee,
Market Requirements and Organisation in developing intellectual capital of the
financial industry in Malaysia.
As noted, the variables are assesses individually to explore the research
objectives and consequently in combining to address the financial growth and
financial performance. The views on the importance of intellectual capital from
variables from researcher perspective, appeared to differ, some empirical studies
found that organisation valued intangibles when they made management decision
or recommendations (Garcia-Meca, 2005). The evidence showed that although
analysts acknowledged the significant of intangibles in wealth creation, they
prioritized the tangible or financial strengths rather than intangibles in contributing
to superior bank performance.
The research study also showed that, human capital becoming relatively
important due to the change of economic conditions and environment, in
particular the shortage of talents and technology and financial crisis. The firm has
advantages in creating resources over the external environment change.
The evidence gathered through interview session conducted with Bank Manager
from research question set in Chapter 3: How do intellectual capitals relate to
and affect bank financial performance further affirmed that it would increase
profitability level of an organisation.
The role of human resource to identify, design and plan employee development
and training metrics to ensure all staffs are equip with sufficient knowledge to
cater for organisation future need and growth.
Employee competency is facilitating through training program and they should
have their own development matrix as well in order to move in-line with
organisation and contribute maximum for the organisation growth long-term. The
fact is agreed by Bank Manager Z and supported by Curado (2008) and Mavridis,
(2004) stated it is extremely important in wealth creation.

Page 46 of 59

The combination of Human, Structural and Relational capitals are needed once
you get it wrong you will lose and I dont believe company only focus on one
because it is very easy to have a loyal customers, but if the business model is to
expensive, you cant generate income. Ultimately you cant continue to provide a
great service to your customer because you are just not efficient enough. So you
have to do it all three concurrently (Interview with Bank Manager Z)
Market requirement as an indicator for upcoming and future economic trend that
would create greater benefits should an organisation able to tackle it timely and
this given a guidance the readiness of an organisation in term of adequate
manpower, talents and technology to penetrate into this market in order generate
more revenues and income. Financial Industry is an industry where providing
services to clientele, understanding and address every customer needs is crucial
and through it will develop more business products to cater their specific needs.
The interview statement quoted by Bank Manager X and Y addressed the above
and highlighted the importance factors to differentiate self with others in the
competitive business environment. The soft skills development and ensure every
bankers is well trained in order to provide an excellence services to attract
customer and business. Clulow (2003) agreed and stated that Knowledge is the
key driver to the business success.
you might know that banks have no product specialization, all products offered
are normal for every bank. The new product offered today, few days later it would
be available and offer at other banks the same product. The question is why
customer selecting this bank and not others? The main factor made the customer
doing such is the service quality, consistency of the services, products knowledge
and the way the customer being treat. (Interview with Bank Manager X)
unlike manufacturing, banks is a service oriental industry, customers are buying
things from banks because of how the management are working in that bank,
and buying the safety guide to protect their money and buying things on how we
grow business and provide credit. (Interview with Bank Manager Y)
Organisation vision and mission statement and culture are mandatory to ensure
the message is convey across all employee. The understanding of organisation
corporate mission will increase the employee loyalty and hence growing together

Page 47 of 59

with an organisation. Organisation needs people to run businesses, to generate

revenues and contribute more innovative business ideas for long-term
competitive sustainability. Barney (1991) stated the understanding of firm vision
and mission statement, culture and combine together to create value.
The combination of Human Resource, Employee, Market Requirement and
Organisation noted that will provide financial growth to an organisation. The
research study showed that, each variable play it own role to address the
intellectual capital issue to facilitate the financial growth of the financial industry in
Chapter 2 of literature review. The assessment of financial statement of
respective organisation indicated clearly the effort and investment in staff training
and development having significant effect on financial performance long-term.
In sum, the research study can be concluded that the variable and hypothesis
defined having significant impact toward financial growth in developing intellectual
capital of the financial industry in Malaysia. However, the lack of supportive fact of
this research would be the quantitative measurements tools apply such as
valuation model in assess intellectual capital, how the intangibles assets
accurately being measure in accounting perspective. In general, most analysts
and researcher would value financial industry from financial performance.
Therefore, intellectual capital measurement through financial perspective is
needed and would construct the continuous of the future research.
5.2. Recommendation
The intellectual capital should be understood and measured within the value
creations model in a firm. Although the managing intellectual capital not being
that easy initially but helpful with a guidance from Bontis, 1996 and
recommended these steps to be followed by an organisation on their intellectual
capital plan:
a. Conduct an Initial intellectual capital audit. Such an examination may consists
of a survey design and administration using Likert-type scales in order to get
a snapshot of the benchmark level of intellectual capital in existence. Each
organisation should design their metrics for their own strategic purpose
(reference to CIMB, Maybank and Public on staff training and development)
b. Make knowledge management a requirement for evaluation purposes for
each employee-assign personal targets to intellectual capital development.

Page 48 of 59

For example, companies can encourage every employee to plan what their
interest to learn or something that currently does not know.
c. Recruit and hire a specialise personnel in Human Resource to fully
responsible on the intellectual capital development of your organisation.
d. Classify your intellectual portfolio by producing a knowledge map of your
organisation-determine in which people and systems knowledge resides.
e. Indentify gap to be filled or holes to be plugged based on weaknesses relative
to competitors and best practices.
f.

The training not only focusing on interpersonal skills development while

market knowledge is equally importance to staff future growth. The market
knowledge acquired by staff would help organisation to overcome and ready
when economic crisis, Banking be the first affected.

g. Continues to focus on communicating the organisation vision and mission

statement to employee. Such event is meant of getting all employees aligned
to the organisation business strategies and instilling awareness, practice and
delivery

of

promise.

They are also

platforms to facilitate

internal

benchmarking and sharing of best practices.

h. Developing staff and having depth in leadership succession plans in
supporting growth strategy. Organisation achievement is directly linked to the
capability and productivity of its people.
i.

Fully utilise the people knowledge and construct them into an innovative ideal
for business expansion. The innovation contributed by people would
eventually generate a great income for business growth long-term.

Ideally, every organisation should have the development metrics which is plan as
accordance with the organisation vision and mission statement defined and
culture background as the main objectives and goals across an organisation.
Balanced Scorecard (BSC) as a measurement tools for an organisation to
measure the performance of the employee as well as business success. As
highlighted by Skandia Navigator and supported by Andriessen (2004) that the
benefits of utilizing Balance Scorecard able to create value in business practice
and measure business and employee performance in a balanced ways. The
model framework cover the area of Financial, Business, Employee and Process
and its flexible to apply any indicator where it find suitable in order to facilitate the
organisation goals and objectives. Noticeable that Balanced Scorecard contained
both financial performance and non-financial measurements for business. The

Page 49 of 59

continuous and modified indicators made the key metrics more flex to address
business growth and success.
Murthy and Mouritsen (2011) pointed out that, the amounts budgeted and utilised
for intellectual capital is a resource and is an expensive investment where
organisation and manager should have consider in term of financial planning and
budgeting. The recommendation is concerned with the investment in order to
appropriately contribute to the efficiency of the financial performance. The value
creation is an on-going process for financial industry as mentioned by Holland
(2010) and organisation or manager should effectively manage their resources in
order to address the internal and external environment change and competitive
market.
The standard financial reporting guidelines set on Intellectual Capital reporting for
Malaysian Financial Reporting system on Intellectual Capital measurement and
disclosure in providing handful information on intellectual capital indicator and
linkage between them and financial outcomes. Apparently, the reporting on
human capital is on voluntarily basis, perhaps to provide a complete picture to an
investor such information can be made as a mandatory disclosure in Annual
Report published by Financial Institutions.
The concept of Intellectual capital plays an importance role and it is still a very
interesting topic for future research and should continue to provide insights into
managing, measuring and reporting intellectual capital that would enhance
organisation performance over time.
Although, intellectual capital and financial resources may not be advantage
creating factor, they provide the foundation upon which the intellectual capital can
make impacts on financial institutions performance. Therefore, it would be
interesting if future quantitative research could explore details in valuation model
incorporated in the impact of tangibles and intangibles assets jointly on firm
performance, also the model would specify clearly between intellectual capital
resource, size and investment in particular and more conditional factors needed
to be taken into consideration as well.

Page 50 of 59

5.3. Limitations
Same like others, this research study suffer from limitations as well. The limitation
of this research study is lack of quantitative data collected. In this regards, most
company unlikely to disclose information in relation to their organisation
especially data involving management information such as the sustainability and
strategic plan on staff training and development, as these information deemed to
be private and confidentially at management point of view. The discussion on this
topic tend to be top high sensitive as their worried the information may leak out to
their competitor, and information only be obtained from the historical data as
published in the Financial Statement.
As the intellectual capital is an intangible asset defined by FASB, MRSB and
FRS138 and it not a mandatory disclosure in Financial Statement. Hence, the
financial information recorded is limited to determine it accuracy and having direct
influence toward Net Profit, Earnings per Share (EPS) and Gross Dividend per
Share (GDPS). The documented information in financial statement limited to total
investment utilized in staff development and training.
The mixed approach research study is a challenge tasks that it requires more
works and financial resources and taken more times than a single approach in
any of the research study conducted (Molina-Azorin, 2011). The difficulty is
limited sample planning. The quantitative data collected from bank limited to 2 in
Malaysia. While the qualitative interviews were conducted not sufficient enough to
deeply address the issue of intellectual capital as the interview targets are the 3
tops financial institutions in Malaysia, those medium to small financial institutions
are not included in this research study. Although the result is persuasive but not
represented the entire financial industry in Malaysia. Providing more detailed and
in-depth information as possible will certainly made this research study more
meaningful and value to other researcher.
Due to the time constraint, should the time permitted, more face-to-face interview
would made this research study more explainable and persuasive in addressing
the issue of importance of intellectual capital at Banks management perspective.
Through sustainability report published only highlighted the utilization and
activities conducted during the year while for long-term human capital
management by an organisation not being discuss in details. Believe through
interview session conducted this grey area able to provide exclusive understand

Page 51 of 59

how a firm management it human capital as it differ from one to another although
both being classified as same sector, but in term of management style would be
significantly difference.
Further, the sample data to be included more compared only 3 banks selected.
The selection should be the mixture of local and foreign banking institutions
incorporated in Malaysia. The overview of local and foreign banking institutions in
intellectual capital management and comparison made to address the gap in
between. Such indicator would further enhance the financial performance as
combining the good practice adopted by respective financial institutions.
5.4. Conclusion
The journey to success is governed by increasingly complex and broadening
regulatory requirements and stakeholder demands. How organisations manage
their human capital today will define their competitive position tomorrow.
Organisation start to view their employee as the pillar of the Bank business and
continuous capitalize in the advancement of expertise across various categories
of employee within an organisation and in an effort to nurture talents as part of
the corporate development strategy.
Securing first place in the overall category and in the financial industry is a
recognition expected and goal by most financial institution in Malaysia. CIMB,
Maybank and Public Group show their increased focus year-on-year to attract the
right graduate and talents to join them. Their have made a considerable efforts to
directly given access to holistic training and development opportunities, coaching
and mentoring from new joiner to senior management in developing accelerated
career paths for all employee across the organisation.
The human capital matrix program designed further enhanced the employee
potential to further benefits the future business growth. The innovation challenge
equip employee with the ability to think creatively and confidently when dealing
with various stakeholders. Rigorous training sessions and challenge been
scheduled and prioritise their employee ability and aspirations to move from one
business line within the organisation to another as well as to move up the
corporate ladder.

Page 52 of 59

Organisation value diversity and thought, developing intellectual capital in

different perspectives that can ultimately achieve better business results,
organisation believed every employee able to bring his own strength and
capability into an organisation and the organisation relies on this pool to take it to
the next sphere of success.
In todays highly competitive business environment, organisation unwavering to
focus and invest in human capital development and training is strong advantage
over its peer and is the underlying foundation of the organisation long-term
business growth strategy. Financial industry is highly regulated industry and
human capital development and training is essential for current and future
businesses growth.
This research constitutes a better understanding of the importance of Intellectual
capital in the current knowledge era of business and organisation. Although the
development of intellectual capital may not able to produce immediate result to an
organisation success but in long-term there is a significant impact towards
development and future competitive advantage to an organisation.
The research has identified the Human Resource, Employee,

Market

Requirement and Organisation as the main variables and financial growth in

developing Intellectual Capital of the financial industry in Malaysia and in building
organisation success. The analysis and evaluation have proved such that for a
business growth and stay competitive advantage, the consideration of intellectual
capital would play an important part in an organisation and should be
incorporated into their strategic plan with a mission that the investment on
employee would get a return in future.
Finally, all business leader should be appreciative of the power knowledge
management can have on business performance. As the financial sector
continues to implement cutting-edge technologies in its business, it is becoming
widely accepted that an organisation success is determined by the decisions
employees make and their behaviour within an organisation. People are the
organisation primary asset. It is the people that provide the support and energy
for the organisation to move forward, constantly delivering and living the
organisation values, thus safeguarding the organisation brand and making it a
sustainable business growth.

Page 53 of 59

Lastly, the future research on the intellectual capital performance may measures
through additional tools such as Return on Asset (ROA), market based
performance measures and accounting based measures. Such variables defined
in return on asset, market based and accounting based measure would be more
interesting in future research study.

Page 54 of 59

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