Impact of Intellectual Capital on Credit Risk of Conventional Banks in Pakistan

Muhammad Nawaz


This study intends to examine the insight that credit risk is connected to intellectual capital. The global problem of credit risk has been persistent and lead to financial crises in the past. This issue is relatively higher in Pakistani banking sector. Many studies were carried out to investigate the determinant of credit risk, yet the problem has remained unexplained and more research is needed. Most of the previous studies have focused on macroeconomic and other environmental variables, industry-specific and bank-specific determinants of credit risk but gave less attention to the moderating role of intellectual capital on the relationship between internal factors and credit risk in the context of conventional banks of Pakistan. Based on the identified gap this study proposes a framework by adding moderating role of intellectual capital on the relationship between internal variable and credit risk of conventional banks of Pakistan. The study has used secondary data on variable of interest from 2006 to 2017. The sample consists of 20 conventional banks with 240 observations. The study used fixed effect and hierarchical regression model for the data analysis. The study found that intellectual capital moderate the relationship between internal variables and credit risk. Based on the findings it is suggested that intellectual capital serves as important toll to manage credit risk effectively. The findings provide new insights about credit risk determinants which will be useful to the practitioners, policy makers and for the academicians to study further.


Credit Risk, Bank Specific Determinants, Intellectual Capital, Moral Hazard

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