The six states of the Gulf Cooperation Council sit at the centre of the region's financial system — the GCC holds roughly 90% of the MENA region's Sharia-compliant assets. After oil prices fell sharply at the end of 2014, GCC banking performance slowed, and governments accelerated economic diversification built on two pillars: turning knowledge into economic value (intellectual capital) and raising corporate-governance standards. This study asks a precise question: does corporate governance actually strengthen the link between a bank's intellectual capital and its performance?
Performance measured by return on assets (ROA), return on equity (ROE), and earnings per share (EPS).
The 58-bank sample across the six GCC securities markets (the study's Table 1). Oman highlighted.
What is intellectual capital?
Intellectual capital is the intangible knowledge that gives a bank its competitive edge. The study models it across four components.
Human capital
The knowledge, skills and experience of a bank's people.
Structural capital
Systems, processes, databases and IT that hold knowledge in place.
Relational capital
Relationships with clients, partners, regulators and society.
Social capital
Internal trust and informal networks among staff.
The governance levers
The study treats corporate governance as a moderator — a factor that can strengthen or weaken how intellectual capital feeds into performance. It focuses on four practices:
- Board independence — independent, non-executive directors
- Board size — the diversity of knowledge around the table
- CEO duality — whether one person is both CEO and chairman
- Ownership structure — who owns the bank, and how concentrated
Figures cited in the study; the GCC's top 10 Islamic banks hold around $400 billion in assets.
What the study found
The picture is nuanced — and that is the point. Across the 58 banks, governance's moderating effect was mostly not statistically significant for return on equity (ROE) and earnings per share (EPS). But for return on assets (ROA), specific levers clearly mattered:
- A larger board strengthened the effect of human capital on performance — more diversity of knowledge around the table.
- Separating the CEO and chairman roles improved how structural capital translated into performance — clearer authority lets the board control the bank's systems.
- Ownership structure shaped the effect of social capital — foreign experience helped improve bank strategies.
Intellectual capital drives bank performance — but the quality of governance, not just its presence, decides how much of that value is actually captured.
Recommendation for banks
- Independent board members
- Separation of the CEO and chairman roles
- An independent audit committee
- Financial and accounting expertise on the board
Conclusion
Corporate governance remains one of the most important — and contested — topics in banking. For the GCC, where economies are diversifying away from oil and knowledge is becoming the core asset, the message is clear: banks that pair strong intellectual capital with high-quality, independent governance are best placed to convert knowledge into lasting performance and value.
Source: Alsarhani, Y. A. S., Laili, N. H. B., & Marzuki, A. (2023). The Moderation Effect of Corporate Governance between the Intellectual Capital and the GCC Banking Industry's Performance. International Journal of Business Society (IJO-BS), 7(6), 775–788. This article is an editorial summary of the published paper.
