Analysis of Islamic Intellectual Capital Performance in Islamic
Banking Industry: Study in Southeast Asia Countries
Amelia Rizky Alamanda
Department of Accounting,Universitas Padjdjaran, Dipati Ukur 35, Bandung, Indonesia
Keywords: Islamic intellectual capital, Islamic banking industry, Southeast Asia countries.
Abstract: Currently, the success of company is not determined by how much capital or physical asset owned, but is
determined by how much the company’s ability to manage existing resources. One of the company’s resources
now starting to be taken into account is the role of intellectual capital (IC). Intellectual capital is defined as
intangible assets that include human resources, customer information, reputation, corporate culture. Basically,
Islamic banking has different characteristics with conventional banking. Islamic Banking should comply
sharia rules in every activity. In banking sector, intellectual capital is the blood of organizations. Islamic
banking has to comply an intellectual capital based on Islamic perspective. This paper aims to analysis Islamic
intellectual capital, consisting of human capital, structural capital, and capital employed in Southeast Asia
countries and their relationship in the Islamic banking industry.
1 INTRODUCTION
Guthrie (2001) noticed that there is the continuing
quest to develop better systems for creating, capturing
and disseminating knowledge within organizations as
traditional accounting systems cannot be used to
record and report an accurate value attributable to
Intellectual Capital (IC). The concept of IC is also
used to reflect the true value of a company.
Organizations are motivated to measure their IC to
assist with competitive benchmarking exercises and
to provide structured information to the capital and
labor markets to enhance perceptions of the company.
Reporting on IC gains is important in the context of
building investor relations and is particularly
important for companies listed on the stock exchange.
Therefore, managers are looking for the best ways to
reflect the value of the IC the companies they
manage. Currently the company's success is not only
determined by how much capital or physical assets
owned, but is determined by how much the company's
ability to manage existing resources. One of the
company's resources are now starting to be taken into
account is the role of intellectual capital (IC) or
intellectual capital. As stated by Pike et.al (2002),
"When a business organization wants to expand, the
key step to do is to increase the value creation of
intellectual capacity".
2 LITERATUR REVIEW
2.1 Resource Based Theory
Resource-Based Theory (RBT) to analyze and
interpret organizational resources to understand how
organizations achieve sustainable competitive
advantage. RBT focuses on the concept of corporate
attributes that difficult-to-imitate as a source of
superior performance and competitive advantage
(Madhani, 2010). RBT pioneered by Penrose (1959)
in Astuti (2005), argued that the company's resources
are heterogeneous, not homogeneous, available
productive services derived from the company about
providing resources to the unique character of each
company. Resources must meet the criteria in order to
provide a competitive advantage and sustainable
performance (Madhani, 2010). VRIN criterias are:
Value (V): resource can be valuable when
delivering strategic value to the company. Resources
provide value if it helps companies to take advantage
of market opportunities or assist in reducing the threat
of market. There is no advantage of having the
resources if it does not add or increase the value of
the company;
Rare (R): resources are difficult to find among
competitors and become a potential company.
Therefore, resources should be rare or unique to offer
276
Alamanda, A.
Analysis of Islamic Intellectual Capital Performance in Islamic Banking Industr y: Study in Southeast Asia Countries.
In Proceedings of the 1st International Conference on Islamic Economics, Business, and Philanthropy (ICIEBP 2017) - Transforming Islamic Economy and Societies, pages 276-280
ISBN: 978-989-758-315-5
Copyright © 2018 by SCITEPRESS – Science and Technology Publications, Lda. All rights reserved

competitive advantage. Resources owned by several
companies in the market can not provide a
competitive advantage, because they can not design
and implement a business strategy that is unique
compared to other competitors;
Imperfect Imitability (I): resources can be the
basis of a sustainable competitive advantage only if
the company is not holding these resources can not
get them or can not imitate these resources; Non-
substitusi (N): non-resource substitution indicates
that the resource can not be replaced with other
alternative power sources. Here, competitors can not
achieve the same performance by replacing the
resource with other alternative power sources. Further
that according to the RBT, the resources can be
generally defined to include assets, organizational
processes, firm attributes, information, or knowledge
that is controlled by a company which can be used to
understand and implement their strategies (Learned,
Christensen, Andrews, & Guth, 1969; Daft, 1983,
Barney, 1991; Mata et al., 1995).
2.2 Stakeholder Theory
Stakeholders in the classic definition of the term
(most often cited) is the definition of Freeman and
Reed (1983: 91) which states that the stakeholders
are: “any identifiable group or individual who can
affect the achievement of an organisation’s
objectives, or is affected by the achievement of an
organisation’s objectives”.
Based on stakeholder theory, organizational
management are expected to perform activities that
are important to their stakeholders and report back on
the activities of the stakeholders. This theory states
that all stakeholders have the right to be provided with
information about how their activities affect the
organization (for example, through pollution,
sponsorship, security initiatives, etc.), even when
they choose not to use such information, and even
when they can not directly play a constructive role in
the survival of the organization (Deegan, 2004).
Further Deegan (2004) stated that the stakeholder
theory emphasizes the accountability of organizations
far exceeds the financial or economic performance is
simple. This theory states that the organization will
choose voluntarily disclose information on
environmental performance, social and intellectual,
over and above the obligatory request, to meet the real
expectations or recognized by stakeholders.
The main purpose of the stakeholder theory is to
help corporate managers understand their
environment and managing stakeholders more
effectively in the presence of the relationships in their
corporate environment. However, the broader
objectives of the stakeholder theory is to help
corporate managers in increasing the value of the
impact of their activities, and minimize losses to the
stakeholders. In fact, the whole core of stakeholder
theory lies in what happens when corporations and
stakeholders carry out their relationships. This theory
can be tested in various ways by using a content
analysis of the company's financial statements
(Guthrie et al., 2006). According to Guthrie et al.
(2006), the financial statements is the most efficient
way for organizations to communicate with
stakeholder groups that are considered to have an
interest in controlling certain strategic aspects of the
organization. Content analysis for the disclosure of
Intellectual Capital can be used to determine whether
it actually happened this communication. Does the
company respond to the expectations of stakeholders,
both real expectations and recognized by
stakeholders, by offering Intellectual Capital
accounts are not required to be disclosed? This
question has gained attention, but a deeper study is
needed to produce a conclusive opinion (Guthrie et
al., 2006). In the context to explain the relationship
VAIC ™ with corporate efficiency, stakeholder
theory should be viewed from two fields, both ethical
(moral) and managerial fields. Ethics argues that all
stakeholders have the right to be treated fairly by the
organization, and managers should manage the
organization for the benefit of all stakeholders
(Deegan, 2004). When the manager is able to manage
the organization's full potential, particularly in efforts
to create value for the company, then it means the
manager has met the ethical aspects of this theory.
Value creation (value cretion) in this context is to
utilize the full potential of the company, both
employees (human capital), physical assets (physical
capital), and structural capital. Good management of
the entire potential of this will create added value for
the company (in this case called VAIC ™) which then
can encourage efficiency stakeholder. Company for
the benefit of managerial stakeholder theory argues
that the strength of stakeholders to influence the
management of the corporation should be viewed as
a function of levels stakeholders control over the
resources needed organization (Watts and
Zimmerman, 1986). When the stakeholders attempt
to control the resources of the organization, then the
orientation is to improve their welfare. Welfare is
realized with the high returns generated by the
organization. In this context, the concerned
stakeholders to influence the management in the
process of exploiting the full potential of the
organization. Because only with proper management
Analysis of Islamic Intellectual Capital Performance in Islamic Banking Industry: Study in Southeast Asia Countries
277

and maximum over the entire potential of this
organization will be able to create value added to then
encourage the efficiency of a company which is the
orientation of the stakeholders in the management
intervened.
3 METHODOLOGY
The population is a region consisting of the
generation of objects or subjects that have certain
qualities and characteristics are determined by the
investigator to be studied and then drawn conclusions
(Sugiono, 2002:72). The population in this study were
all Islamic Banks, namely Bank Muamalat Indonesia,
Bank Syariah Mandiri, Bank Mega Syariah, Maybank
Malaysia, CIMB Malaysia, Islamic Bank Berhad,
Baiduri Bank, Bank Islam Brunei Darussalam,
Perbadanan Tabung Amanah Islam Brunei.
The sample is defined as a part or the whole
population with a certain method as a part or the
whole population as a representative part of the
population. The sampling technique used was
purposive sampling in order to obtain a sample that is
consistent with the objectives of the study. Purposive
sampling is a sampling method that is based on
several considerations or specific criteria. The criteria
as follows:
a. Firms belonging to the Islamic Banks
b. Has total assets of the three greatest among
Islamic Banks in Indonesia, Malaysia, and
Brunei Darussalam.
c. Published inancial reports, statements and
reports zakat charity fund published during the
year 2009 to 2016.
Selection of the banking sector as an object of
Selection of the banking sector as an object of
research refers to research Firer and William (2003)
who calls the banking sector as one (of 4) sector
potential. In addition, the banking sector has been on
the intellectual aspects, overall, employees in the
banking sector is more homogeneous compared with
other economic sectors (Kubo and Saka, 2002).
Homogeneity is important to ensure that all
employees have a level of knowledge that is not very
diverse (heterogeneous), so the treatment of the
human capital becomes more objective. Treatment of
human capital in this case related to salaries, training,
career opportunity, and so on.
4 RESULTS
Data necessary to perform the calculations of VAIC
method came from financial reports for the period
2009 – 2016. The table is shown in Appendix A.
Intellectual capital is represented as a hidden wealth
of the entity and often is not taken into account into
financial reports and accounting system. The
existence of intangible assets is recognized by the
investors and strongly influences the strategic
decisions of companies and their stakeholders.
Intellectual capital continues to lack clear guidelines
supported by best practices leading to a continuation
of the problem.
The VAIC facilitates measurement of intellectual
capital and the efficiency of its individual
components. VAIC is objective method, because data
used are derived directly from the financial reports.
Thus, the source of data used, including the financial
reports are reliable and verifiable. Despite some
constraints, VAIC can be successfully used for
statistical analysis. This methodology can be used in
both business practice to report intellectual capital
and in studies of the correlation between intellectual
capital and the business performance of entities.
It should also be noted that VAIC has limitations.
How to calculate the value added, as well as the
components used to measure human capital by only
using the expense of training or the expense of
workshop based on both Islamic and non-Islamic
rules and knowledge. This can lead to large
discrepancies between the results. While it is
important for the credibility of comparisons is the
profile of the business.
Legitimacy theory is closely linked to stakeholder
theory. Legitimacy theory states that organizations
are looking for ways on an ongoing basis to ensure
they are operating within the limits and norms
prevailing in society (Deegan, 2004). According to
Deegan (2004), in the perspective of legitimacy
theory, a company will voluntarily report their
activities if the management considers that this is the
expected community. Legitimacy theory relies on the
premise that there is a 'social contract' between the
company and the communities in which it operates.
The social contract is a way to explain the large
number of people's expectations about how the
organization should carry out its operations. This
social expectation is not fixed, but change over time.
This requires the company to be responsive to the
environment in which they operate (Deegan, 2004).
Organizations can use the disclosure to
demonstrate management's attention to social values,
or to redirect the attention of the community of the
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existence of the negative influence of an
organization's activities (Lindblom, 1994 in Guthrie
et al., 2006). A number of previous studies assessed
the voluntary disclosure of the annual report and
looked at the reporting of environmental and social
information as the methods used by organizations to
respond to public pressure (Guthrie et al., 2006).
Value added in this case is measured by looking
at the value added intellectual coefficient (VAIC ™).
Some research on the analysis of disclosure items /
components of Intellectual Capital in the financial
statements are also using stakeholder theory as the
primary basis (see eg Nielsen et al., 2006; Riahi-
Belkaoui, 2003, and Guthrie et al., 2006). While
legitimacy theory became the foundation underlying
both in this study. In the view of legitimacy theory,
companies will be compelled to show its capacitance
Intellectual Capital in the financial statements to
obtain public legitimacy of its intellectual property.
Recognition of public legitimacy becomes important
for the company to maintain its existence in the social
environment of the company.
The proposed method provides the entities with a
flexible means to deal with performance evaluation of
Islamic Intellectual Capital in Islamic Banking. It
should be noticed that the empirical material used in
this paper is short-term. The limitations of the study
are: way of estimation of value added, human capital
and structural capital. In the last decade, intellectual
capital is considered as an asset, but measuring the
value and especially reporting the value of this asset
is relatively new in practice. At the same time, the
important point in Islamic Banking to measure
Islamic Intellectual Capital is Temporary Syirkah
Fund should be the first and the main consideration,
because it plays the unique and differ Islamic
Banking from conventional banking. Further studies
may include companies not only in Islamic Banking
industries but also from another Islamic financial
institutions. Moreover, it could be interesting to check
more methods and recommend the best methods for
different sectors.
Agency theory perspective is used to understand
the theory of corporate governance. Jensen and
Meckling (1976) describe the agency relationship as
a contract under which involve the principal agents to
carry out their interests involving the delegation of
decision-making by agents. Separation of ownership
by the principal to control the agent in an organization
tend to cause conflict between the principal agency to
agency. Jensen and Meckling (1976), Watts and
Zimmerman (1986) stating that the financial
statements prepared by the accounting figures are
expected to minimize the conflict between the parties
concerned.
What is meant by "whom" is the shareholders,
while the "why" is because of the relationship
between shareholders and various stakeholders in the
company. Previous study of Jensen and Meckling
(1976) indicate that the agency is to minimize conflict
by increasing managerial ownership in the company
and states that the greater the ownership of the
management company, the management will tend to
strive to improve its performance for the benefit of
shareholders and for their own interests.
5 CONCLUSION
Currently the company's success is not only
determined by how much capital or physical assets
owned, but is determined by how much the company's
ability to manage existing resources. Resource-Based
Theory (RBT) to analyze and interpret organizational
resources to understand how organizations achieve
sustainable competitive advantage. At the same time,
the important point in Islamic banking to measure
Islamic Intellectual Capital is Temporary Syirkah
Fund should be the first and the main consideration,
because it plays the unique and differ Islamic banking
from conventional banking. Further studies may
include companies not only in Islamic Banking
industries but also from another Islamic financial
institutions.
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