Chapter 4: Intellectual Capital Efficiency and Islamic Banks’ Stability: Evidence from Asian Countries

This study aims to look into the effect of intellectual capital efficiency on Islamic banks’ financial stability after controlling the bank-specific and macroeconomic variables. This study employed a hierarchical two-step system generalized method of moment (2SYS-GMM) estimation technique to analyze the data collected from 94 Islamic banks in 18 Asian Islamic countries during the period 2010–2020. The empirical findings show that ICE components, specifically SCE and RCE, have a positive and statistically significant effect on Islamic banks’ financial stability. Our findings suggest that policymakers and top management at Islamic banks should pay closer attention to ICE resources, which have the potential to improve bank efficiency and stability while also keeping them competitive in times of distress.