Examining the mediating impact of intellectual capital between credit appraisal measurement and banks' performance

Abstract

After the global financial crisis, the banking industry concentrated on lowering loan losses by implementing an enhanced credit appraisal measurement program, in addition to optimizing profit. Banks focused more on how to maximize its utilization, lower operating costs and loan losses, and increase profitability. A way of conducting business that lowers costs and increases profits, credit appraisal measurement has frameworks that are appropriately connected to the many customer-oriented services provided. The goal of the current study is to look into how intellectual capital affects the performance of Nepali banks and the way that credit appraisal is measured. Its main focus is on the relationship between intellectual capital and bank performance in Nepal. It also highlights how important credit appraisal measurement can be for enhancing bank financial performances. 175 respondents from commercial banks in Kathmandu, Bhaktapur, and Lalitpur provided the data. A self-administered questionnaire was filled out by participants, which served as the main source of quantitative data for this study. In addition, the data collected via surveys is examined using partial least squares structural equation modeling (PLS-SEM). The results point to a positive correlation between bank performance and credit appraisal measurement. The results show that intellectual capital has an immense impact on bank performance. The results also show that intellectual capital acts as a mediating factor in the relationship between credit appraisal measurement and bank performance. In order to enhance customer satisfaction, fulfill the targeted profitability ratio from credit appraisal measurement, and generate robust financial performance, management should prioritize the appropriate use of intellectual capital.

Keywords

• Credit appraisal measurement
• Intellectual capital
• Bank
• Bank performance
• Commercial bank