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Impact of Human Capital Investment on Bank Financial Performances an Empirical Study of Banks in

Bangladesh

Introduction
The importance of human capital as a source of progress and economic growth has long
been recognized in the literature of economics. Adam Smith was the first classical
economist to include human capital in his definition of capital. In the economic
perspective, the capital refers to factors of production used to create goods or services;
the human is the subject to take charge of all economic activities such as production,
consumption, and transaction. Thus, it can be recognized that human capital means one of
production elements which can generate added-values through inputting it. Human
capital could be defined as the knowledge, skills, abilities and capabilities possessed by
people General human capital is to be defined by generic knowledge and skill, not
specific to a task or a company, usually accumulated through working experiences and
education.
Human capital is possibly the most valuable asset held by an organization today. It is also
the most elusive asset to be managed for a variety of reasons. For organizations,
measuring the value and return on investment in human capital is both a challenge and a
strategic necessity for today's human resource profession. Since human capital is not like
other types of capital, it is not easy to calculate its value. Human capital simultaneously
represents the single greatest potential asset and the single greatest potential liability that
an organization will acquire during business.
The purpose of this paper is to see if there is any relationship between the human capital
investments on financial performance in commercial Banks of Bangladesh. The
majorobjective of this study is to investigating the impact of investment in human capital
on financial performances of the Banks in Bangladesh.
This paper considers the term human capital has been identified as a key element in
improving a firm assets and employees in order to increase productive as well as sustain
competitive advantage which will leads to enhance higher financial performance. This
definition expresses the importance of human capital on financial performances of
company. Therefore, discussion on impact of investment in human capital on financial
performance is not easily ignorable.

Impact of Human Capital Investment on Bank Financial Performances an Empirical Study of Banks in
Bangladesh

Objectives

The main purpose of this study is to examine the impact of investment in human capital
on firms financial performances of Commercial banks in Bangladesh.
In this paper, I have tried to identify the relationship between ratios relate to financial
performances and investment in human capital of Banks. In this setting, this research
aims to examine the current level of investment in human capital in 10 commercial banks
of Bangladesh and also examine the relationship between investment in human capital
and the financial performances of Banks in Bangladesh.
In addition, this study further extends new ways to measure the impact of investment in
human resources activities on the effectiveness of human capital: the case of commercial
banks in Bangladesh.

Impact of Human Capital Investment on Bank Financial Performances an Empirical Study of Banks in
Bangladesh

METHODOLOGY
Sample selection
The Banks which I was given to choose from are:
Sl. No.
1
2
3
4
5

Name
AB Bank Limited
Bank Asia Limited
The CITY Bank Limited
Dutch-Bangla Bank Limited
Eastern Bank Limited

Sl. No.
6
7
8
9
10

Name
EXIM Bank Limited
Mercantile Bank Limited
ONE Bank Limited
Prime Bank Limited
United Commercial Bank Limited

As I am conducting an empirical study , there is a need to use at least one statistical


method & hence I used regression analysis model of statistics. One of the major prerequisite of this study is that, it requires a sample size of at least 10 observations. Thats
why, this study consists of 10 observations, alone which consists of 5 years data. Heres
the conceptual framework:

Conceptual framework:

Firm Financial
Performances

Investment in
Human Capital

Return on Assets (ROA)

Return on Equity (ROE)

Return on Investment (ROI)

Impact of Human Capital Investment on Bank Financial Performances an Empirical Study of Banks in
Bangladesh

Sample Description
My original sample consists of 10 (Ten) Commercial Banks listed in Dhaka Stock
Exchange (DSE) during the period 20092013.
The required data of these companies are been arranged for the building of the reports,
which are freely downloadable from their respective websites.
For all the identified firms, I first identified all the related data in order to inject a precise
& effective analysis to aid the research part. The impact of investment in human capital
on firms financial performances basically relies on the salary data of an organization.
Therefore, I derived all those data from the annual statements of the respective banks.
I then collected financial ratio data by using Data stream. I was able to identify all the 10
companies price data for the given specific period. Since some firms data are fully given
the annual report, I found out that some of the companys data were given in partial.
More even, some of the companys data were given altogether, from which, I had to find
out specific information
Since I am only interested in finding out the impact of investment in human capital on
firms financial performances for each single factor, this sample selection is a major
concern. So, I think, my selection of sample will provide a greater insight into the study.
Measurement of the variables
Firm financial performances: Return on assets (ROA), Return on Equity (ROE), Return
on investment (ROI),and Employee Productivity were used as proxies for firm financial
performance by previous studies.Accordingly, this study operationalizes the firm
financialperformances as Return on Assets, Return on Equity and Return on investment.
These three variables weredefined as:
Return on Assets (ROA) = Profit Before Tax / Average Total Assets
Return on Equity (ROE) = Profit Before Tax / Average Common Stock
Investment incurred on training and development, skills, education, and knowledge were
considered asproxy variables for investment in human capital by prior studies.

Impact of Human Capital Investment on Bank Financial Performances an Empirical Study of Banks in
Bangladesh

Model Description
In accordance with what has been said, and what has been elicited from previous studies,
the study suggeststhe following model to work out the impact of investment in human
resources activities (independent variable) onthe human capital effectiveness in the
commercial banks in Bangladesh (dependent variable).
The Independent Variables
Independent variable is the human resources investment, which is consisting of the
following components:
1) Investment in staffing: the human resource policies and procedures in recruiting and
hiring employees: thestudy discusses the workforce plan in selecting and hiring
employees and its impact on the human capitaleffectiveness in the bank. The research
focuses on how banks design and link its workforce plan with thebank's strategy to
achieve its effectiveness.
2) The investment in employees training and development plans and programs: the study
examined how banksidentified their training and development programs and plans, and if
these plans are taking into considerationthe bank's needs for achieving the objectives, and
also if these plans were designed for career advancement.
The research also tried to study how banks measure the impact of training and
development plans toincrease the return on investment from those programs.
3) The investment in employees' incentives system: the effect of performance
management in the bankingsector on increasing the productivity and the quality of
services to maximize its effectiveness. Compensationand benefits were studied to see the
link between them and the impact on minimizing the Turnover rate andincreasing the
ROI when allocating a budget for incentives each year, and also to test how effective
theevaluation system to assess the return on investment on employees.

Impact of Human Capital Investment on Bank Financial Performances an Empirical Study of Banks in
Bangladesh

The Dependent Variable


The Dependent Variableis the effectiveness of investment in the human capital of the
bank through studyingthe following measurements:
Human capital return on investment: the researcher measures the profitability of
employees by dividing thenet income by the number of employees through analyzing the
banks financial statement from the year 2009 to 2013.
Data collection
Data need for the model is obtain from two sources, the first is the data published by the
Bangladeshi banks, and thesecond is the questionnaires. The data for the variables the
human capital Return on investment, the Return on assets, Return on Equity are
computed from the annual reports of the banks. While the data for staffing,training &
development, incentives and retention variables collected by structural questionnaire.
Before analysis of the data each of the variables collected by questionnaire is averaged
for each bank, so that 10observations is estimated for the 10 banks.
Statistical Analysis
Descriptive statistics techniques used to describe the demographic characteristics of
respondents and opinions,such as frequencies, percentage, means and standard
deviations. Simple and multiple regressions Linear Regression model was used to test the
relation between dependant and independent variables, and test thehypothesis using the
model of the study.

Impact of Human Capital Investment on Bank Financial Performances an Empirical Study of Banks in
Bangladesh

Hypotheses of the Study


Since there are three dependent variables, the research will conduct three hypotheses.
They are as follow:
1) Null Hypothesis,
Ho1: There is no significant effect of investment in human resources activities on the
human capital Return on Asset (ROA).
Alternative Hypothesis,
Ha1: There is no significant effect of investment in human resources activities on the
human capital Return on Asset (ROA).
2) Null Hypothesis,
Ho1: There is no significant effect of investment in human resources activities on the
human capital Return on Equity (ROE).
Alternative Hypothesis,
Ha1: There is no significant effect of investment in human resources activities on the
human capital Return on Equity (ROE).
3) Null Hypothesis,
Ho1: There is no significant effect of investment in human resources activities on the
human capital Return on Investment (ROI).
Alternative Hypothesis,
Ha1: There is no significant effect of investment in human resources activities on the
human capital Return on Investment (ROI).

Impact of Human Capital Investment on Bank Financial Performances an Empirical Study of Banks in
Bangladesh

Testing the Study's Hypothesis


The first hypothesis:
Ho1: There is no significant effect of investment in human resources activities on the
human capital Return on Asset (ROA).
This study intends to see if there is any relationship between the human resources
investment on the human capital return on Asset. Thus linear regression is used to test
this hypothesis. Table (1) summarized the result of the regression.
Result from the table (1) shows a statistically significant relationship between the two
variables (p= 0.001) which is less than (0.05). Meanwhile the coefficient (B) in the
regression for the human resources investment. is .025 and statistically significant at
(0.05) (p=0.001). This indicates that for every one unit increase in the human resources
investment, there would be .025 changes in the human capital return on Asset. The
Adjusted R2 for this analysis is 0.275. This indicates that 27.5 % of the variance in the
human capital return on Asset.
In conclusion, the results confirm that there is a significant relationship between human
resources investment on the human capital return on Asset. Therefore (Ho1) is rejected.
That is there is significant impact of human resources investment on the human capital
return on Asset.
The Second hypothesis:
Ho1: There is no significant effect of investment in human resources activities on the
human capital Return on Equity (ROE).
This study intends to see if there is any relationship between the human resources
investment on the human capital return on Equity. Thus linear regression is used to test
this hypothesis. Table (2) summarized the result of the regression.
Result from the table (2) shows a statistically insignificant relationship between the two
variables (p= 0.51) which is higher than (0.05). Meanwhile the coefficient (B) in the
8

Impact of Human Capital Investment on Bank Financial Performances an Empirical Study of Banks in
Bangladesh

regression for the human resources investment. is .063 and statistically significant at
(0.05) (p=0.001). This indicates that for every one unit increase in the human resources
investment, there would be .063 changes in the human capital return on Equity. The
Adjusted R2 for this analysis is -0.20. This indicates that 20 % of the negative variance in
the human capital return on Equity.
In conclusion, the results confirm that there is no significant relationship between human
resources investment on the human capital return on Equity. Therefore (Ho1) is
accepted. That is there is no significant impact of human resources investment on the
human capital return on Equity.
The Third hypothesis:
Ho1: There is no significant effect of investment in human resources activities on the
human capital Return on Investment (ROI).
This study intends to see if there is any relationship between the human resources
investment on the human capital return on Investment. Thus linear regression is used to
test this hypothesis. Table (3) summarized the result of the regression.
Result from the table (3) shows a statistiscally insignificant relationship between the two
variables (p= 0.61) which is higher than (0.05). Meanwhile the coefficient (B) in the
regression for the human resources investment. is .035 and statistically significant at
(0.05) (p=0.001). This indicates that for every one unit increase in the human resources
investment, there would be .035 changes in the human capital return on Investment. The
Adjusted R2 for this analysis is -0.095. This indicates that 9.5 % of the negative variance
in the human capital return on Investment.
In conclusion, the results confirm that there is no significant relationship between human
resources investment on the human capital return on Investment. Therefore (Ho1) is
accepted. That is there is no significant impact of human resources investment on the
human capital return on Investment.

Impact of Human Capital Investment on Bank Financial Performances an Empirical Study of Banks in
Bangladesh

Analysis of the Study

As per data analysis, all the companies in sample disclose similar components in relate to
investment in human capital as:

Salaries and wages,


Bonus and Allowances,
Training and Development
Provident Fund Contribution

I have tried to find out the level dependency of the three dependent variables upon these
independent variables. For that reason, I have conducted a regression analysis as follow:

Adjusted
R

Standard
error of the
estimate

IHC & ROA

0.773

0.597

0.275

0.003

1.851

0.257

IHC & ROE

0.576

0.331

-0.203

0.064

0.620

0.668

IHC & ROI

0.626

0.391

-0.095

0.046

0.804

0.572

Hypotheses

F Value Significance

Table: Regression analysis

According to the Table above, 59.7%, 33.1% and 39.1% of the variation in investment in
human capital was explained by associate variable of ROA, ROE and ROI respectively.
At the same time only a small margin of errors, e = .003, .064 and .046 are involved in
the regression lines. Further, F-test revealed a relative magnitude of the regression
(explained by the regression) and the residual (unexplained by the regression), 7.472,
22.76 and 5.115. Table above reveals that there is a no significance relationship between
(1) IHC & ROA (.257), (2) IHC & ROE (.668), and (3) IHC & ROI (0.572).
Accordingly, it can be concluded that investment in human capital does not significantly
influences on financial performance of commercial banks in Bangladesh.

10

Impact of Human Capital Investment on Bank Financial Performances an Empirical Study of Banks in
Bangladesh

OVERVIEW OF THE BANKS.

11

Impact of Human Capital Investment on Bank Financial Performances an Empirical Study of Banks in
Bangladesh

AB Bank Limited, the first private sector bank was incorporated in Bangladesh on 31st
December 1981 as Arab Bangladesh Bank Limited and started its operation with effect
from April 12, 1982.
AB Bank is known as one of leading banks of the country since its commencement 32
years ago. Their continuous focus devolves their best efforts to make available the latest
products and services considering their valued customers and client perspectives and
needs with their experience, passion, dedication and quality standards.
Despite the adverse market conditions, AB Bank Limited concluded the 2013 financial
year with good results. The Bank's consolidated NOPAT amounting to Taka 146 crore
which is 5% higher than that of previous year. The asset base of AB Bank Limited and Its
subsidiaries grew by 14% from 2012 to stand at over Tk 17,552 crore at the end of 2013.
The Bank showed strong growth in loans and deposits. Deposit of the Bank rose by Tk.
2,408 crore i.e. 21% while the diversified Loan Portfolio grew by over 11% during the
year and recorded an increase of Tk 1,119 cr. Foreign Trade Business (Import & Export)
handling stood at Tk 16,615 crore resulting a growth of over 21% in 2013.

Key IHC
indicator
s

2013

2012

2011

2010

2009

Salary and
Wages
Bonus and
Allowances
Training and
Developmen
t
Provident
Fund
Contribution

1,883,347,64
1
197,748,055

1,690,226,02
2
202,684,694

1,510,452,07
5
115,996,714

1,631,216,56
6
287,582,796

1,085,019,05
7
146,857,358

11,191,287

8,773,550

7,079,757

22,853,638

8,590,967

198,247,120

177,918,529

158,994,955

171,707,007

114,212,532

ROA

0.53%

0.88%

0.93%

3.08%

3.52%

12

Impact of Human Capital Investment on Bank Financial Performances an Empirical Study of Banks in
Bangladesh

ROE
ROI

6.13%
10.37%

9.31%
11.39%

*IHC= Investment in Human Capital

13

9.25%
14.62%

30.77%
32.72%

39.84%
21.06%

Impact of Human Capital Investment on Bank Financial Performances an Empirical Study of Banks in
Bangladesh

Bank Asia has been launched by a group of successful entrepreneurs with recognized
standing in the society. The management of the Bank consists of a team led by senior
bankers with decades of experience in national and international markets. The senior
management team is ably supported by a group of professionals many of whom have
exposure in the international market.
It set milestone by acquiring the business operations of the Bank of Nova Scotia in
Dhaka, first in the banking history of Bangladesh. It again repeated the performance by
acquiring the Bangladesh operations of Muslim Commercial Bank Ltd. (MCB), a
Pakistani bank.
In the year 2003 the Bank again came to the limelight with oversubscription of the Initial
Public Offering of the shares of the Bank, which was a record (55 times) in our capital
market's history and its shares commands respectable premium.
The asset and liability growth has been remarkable. Bank Asia has been actively
participating in the local money market as well as foreign currency market without
exposing the Bank to vulnerable positions. The Bank's investment in Treasury Bills and
other securities went up noticeably opening up opportunities for enhancing income in the
context of a regime of gradual interest rate decline.

Key IHC
indicators
Salary and Wages
Bonus and
Allowances
Training and
Development
Provident Fund
Contribution
ROA

ROE

2013

2012

2011

2010

2009

1,487,461,78
1
184,017,005

1,322,836,87
4
151,799,878

1,122,537,82
3
486,913,230

1,015,219,52
8
461,129,052

9,450,451

7,852,642

4,868,888

4,228,866

593,257,19
1
263,607,73
3
3,829,629

48,142,786

42,443,382

35,573,174

29,728,206

1 6,848,143

0.96%
10.55%

0.70%
7.11%

1.72%
19.61%

2.22%
32.12%

2.18%
32.03%

14

Impact of Human Capital Investment on Bank Financial Performances an Empirical Study of Banks in
Bangladesh

ROI

8.51%

5.20%

13.98%

15.79%

18.61%

City Bank is one of the oldest private Commercial Banks operating in Bangladesh. It is a
top bank among the oldest five Commercial Banks in the country which started their
operations in 1983. The Bank started its journey on 27th March 1983 through opening its
first branch at B. B. Avenue Branch in the capital, Dhaka city. It was the visionary
entrepreneurship of around 13 local businessmen who braved the immense uncertainties
and risks with courage and zeal that made the establishment & forward march of the bank
possible. Those sponsor directors commenced the journey with only Taka 3.4 crore worth
of Capital, which now is a respectable Taka 330.77 crore as capital & reserve.
City Bank is one of the largest corporate banks in the country with a current business
model that heavily encourages and supports the growth of the bank in Retail and SME
Banking. The bank is very much on its way to opening many independent SME centers
across the country within a short time. The bank is also very active in the workers'
foreign remittance business. It has strong tie-ups with major exchange companies in the
Middle East, Europe, Far East & USA, from where thousands of individual remittances
come to the country every month for disbursements through the bank's large network of
99 online branches and SME service centers.

Key IHC
indicato
rs
Salary and
Wages
Bonus and
Allowances
Training
and
Developme
nt

2013

2012

2011

2010

2009

2,454,346,
593
6,430,000

2,080,282,
042
4,140,000

1,830,732,
231
3,896,920

1,194,956,
965
93,172,818

158,300

540,078

2,039,050

1,649,083,
246
213,829,91
2
27,442,263

15

13,661,915

Impact of Human Capital Investment on Bank Financial Performances an Empirical Study of Banks in
Bangladesh

Provident
Fund
Contributio
n

385,684,46
2

341,791,69
4

299,878,35
7

63,582,197

50,042,557

ROA

0.68%
10.30%
7.75%

0.62%
12.10%
9.80%

1.95%
11.50%
9.28%

2.21%
20.38%
18.56%

1.23%
16.42%
13.48%

ROE
ROI

Dutch-Bangla Bank started operation is Bangladesh's first joint venture bank. The bank
was an effort by local shareholders spearheaded by M Sahabuddin Ahmed (founder
chairman) and the Dutch company FMO.
From the onset, the focus of the bank has been financing high-growth manufacturing
industries in Bangladesh. The rationale being that the manufacturing sector exports
Bangladeshi products worldwide. Thereby financing and concentrating on this sector
allows Bangladesh to achieve the desired growth. DBBL's other focus is Corporate Social
Responsibility (CSR). Even though CSR is now a clich, DBBL is the pioneer in this
sector and termed the contribution simply as 'social responsibility'. Due to its investment
in this sector, DBBL has become one of the largest donors and the largest bank donor in
Bangladesh. The bank has won numerous international awards because of its unique
approach as a socially conscious bank.

Key IHC
indicators
Salary and
Wages
Bonus and
Allowances
Training and
Development
Provident

2013

2012

2011

2010

2009

3,473,765,
495
383,257,7
62
8,752,877

3,077,365,
801
416,979,3
29
13,845,01
3
111,064,4

2,082,451,
151
370,960,9
82
14,490,58
1
73,068,71

1,476,789,
894
250,760,1
12
15,456,98
7
51,817,37

986,799,
655
192,554,
789
16,234,0
98
35,614,3

126,356,6

16

Impact of Human Capital Investment on Bank Financial Performances an Empirical Study of Banks in
Bangladesh

Fund
Contribution
ROA

ROE
ROI

97

94

57

1.20%
17.00%
10.80%

1.70%
23.40%
11.60%

1.90%
27.00%
10.90%

2.20%
35.30%
12.20%

1.60%
30.30%
14.60%

17

Impact of Human Capital Investment on Bank Financial Performances an Empirical Study of Banks in
Bangladesh

With a vision to become the bank of choice and to be the most valuable financial brand in
Bangladesh, Eastern Bank Ltd. (EBL) began its journey in 1992. Over the years EBL has
established itself as a leading private commercial bank in the country with undisputed
leadership in Corporate Banking and a strong Consumer and SME growth engines. EBL's
ambition is to be the number one financial services provider, creating lasting value for its
clientele, shareholder, and employees and above all for the community it operates in.
Bangladesh Banking Sector has grown from strength to strength over the past one decade
and is fiercely competitive, especially in the Consumer Banking segment. EBL offers a
wide range of depository, loan and card products to cater virtually for every customer
segment. From Student Banking to Priority Banking to Platinum card EBL has almost all
banking products in its repertoire. The product basket is rich in content featuring different
types of Savings and Current Accounts, Personal Loans, Debit Cards, Credit Cards, Prepaid Cards, Internet Banking, Corporate Banking, SME Banking, Investment Banking,
Treasury & Syndication services. The customers are served through a network of 73
Branches, 181 ATMs and 42 Bills pay countrywide. EBL has its presence in the major
cities/towns in the country including Dhaka, Chittagong, Sylhet, Khulna, and Rajshahi &
Cox's Bazar.

Key IHC
indicators

2013

2012

2011

2010

2009

Salary and
Wages
Bonus and
Allowances
Training and
Development
Provident
Fund
Contribution

1,764,751
,197
322,619,4
55
6,354,221

1,440,473
,901
267,508,6
58
5,665,502

1,325,173
,260
270,919,6
83
3,863,459

1,000,248
,431
217,541,6
24
4,036,684

64,365,56
8

53,306,14
2

47,565,17
7

35,104,57
3

644,439,
325
54,916,2
32
3,523,86
1
28,401,4
65

ROA

1.06%
4.38%
2.63%

1.45%
3.92%
1.94%

1.65%
3.55%
1.63%

3.54%
4.02%
1.99%

2.19%
3.38%
1.82%

ROE
ROI

18

Impact of Human Capital Investment on Bank Financial Performances an Empirical Study of Banks in
Bangladesh

19

Impact of Human Capital Investment on Bank Financial Performances an Empirical Study of Banks in
Bangladesh

Export Import Bank of Bangladesh Limited was established in the year 1999 under the
leadership of Late Mr. ShahjahanKabir, Founder Chairman who had a long dream of
floating a commercial bank which would contribute to the socio-economic development
of our country. He had a long experience as a good banker. A group of highly qualified
and successful entrepreneurs joined their hands with the founder chairman to materialize
his dream.
Organizational culture is considered as an essential component of business corporations
as it has the ability to bind organizational members together. The culture and values of
our bank have been proved as a source of competitive advantage for us and are acting as
a key component to establish the relationship between the bank and our employees and ,
in turn , between our employees and our customers. Our culture and values also
encourage customers and employees to join us and stay with us.
EXIM Bank has also been able to improve organizational performance via improving the
performance of individual contributors and also recognizes existing talents to fill up the
higher vacancies within the organization or place them in the right position, wherein the
best use of their abilities can be ensured. Our culture promotes sharing of common goal
which ensures harmonious relationship in the working environment.

Key IHC
indicators
Salary and
Wages
Bonus and
Allowances
Training and
Development
Provident
Fund
Contribution
ROA

2013

2012

2011

1,428,294,
247
177,336,92
0
11,241,209

1,363,756, 1,292,014,
665
793
252,921,60 284,931,85
0
0
12,377,755 9,483,022

59,747,409

53,525,494 47,951,122

2.23%

1.76%
20

1.72%

2010

2009

932,982,
480
220,600,
557
9,129,06
2
38,440,3
69

807,198,
037
218,940,
500
9,085,65
0
31,325,4
74

1.64%

1.22%

Impact of Human Capital Investment on Bank Financial Performances an Empirical Study of Banks in
Bangladesh

ROE
ROI

13.42%
2.36%

16.84%
1.31%

17.95%
9.33%

19.84%
8.41%

18.80%
8.71%

Mercantile Bank Limited incorporated as a Private Commercial Bank on May 20, 1999.
Subsequently, it commenced business on June 02, 1999 with a vision for being finest
corporate citizen. MBL enlisted in Dhaka Stock Exchange (DSE) and Chittagong Stock
Exchange (CSE) on February 16, 2004 and February 26, 2004 respectively. MBL is the
output of some visionary entrepreneurs' dream of contributing directly to the economy by
catering various banking needs to all segments of people living home and abroad.
MBL has been able to establish itself as a leading third generation private commercial
bank by dint of its prudent policy guidelines coupled with proper execution, wider range
of banking products and excellent customer services. The core activities of the Bank are
to provide all kinds of commercial banking services including deposits mobilization,
providing loans, discounting bills, foreign exchange business, off-shore banking, treasury
function, card business and mobile banking.

Key IHC
indicator
s

2013

2012

2011

2010

2009

Salary and
Wages
Bonus and
Allowances
Training and
Developmen
t
Provident
Fund
Contribution

1,264,126,
693
330,989,3
53
3,213,904

930,953,
219
313,913,
000
9,447,66
7

707,572,
391
235,069,
327
3,147,45
4

569,902,
419
195,543,
482
3,185,25
1

325,821,
784
123,787,
924
1,488,99
7

71,230,57
4

48,191,4
09

39,030,8
87

31,063,2
12

17,818,6
83

ROA

1.43%

1.38%

2.29%

3.63%

1.89%

ROE

15.09%

16.05%

14.93%

13.13%

13.46%

21

Impact of Human Capital Investment on Bank Financial Performances an Empirical Study of Banks in
Bangladesh

ROI

14.08%

14.31%

22

14.94%

14.88%

12.63%

Impact of Human Capital Investment on Bank Financial Performances an Empirical Study of Banks in
Bangladesh

ONE Bank Limited was incorporated in May, 1999 With the Registrar of Joint Stock
Companies under the Companies Act 1994, as a commercial bank in the private sector.
The Bank is pledge-bound to serve the customers and the community with utmost
dedication. The prime focus is on efficiency, transparency, precision and motivation with
the spirit and conviction to excel as ONE Bank in both value and image.
The name 'ONE Bank' is derived from the insight and long nourished feelings of the
promoters to reach out to the people of all walks of life and progress together towards
prosperity in a spirit of oneness.
OBL is a private sector commercial bank dedicated in the business line of taking deposits
from public through its various saving schemes and lending the fund in various sectors at
a higher margin. However, due attention is given in respect of risk undertaking, risk
hedging and if not appropriately hedged, reflection of the same in pricing. In the
financing side, the bank's major concentration is in trade finance covering about 20.88%
of total financing as on YE2006 which is mainly a short-term investment.

Key IHC
indicato
rs

2013

2012

2011

2010

2009

Salary and
Wages
Bonus and
Allowances
Training
and
Developme
nt
Provident
Fund
Contributio
n

2,939,016,
912
379,634,0
25
14,657,05
9

2,673,292,
974
444,844,9
51
16,220,80
3

2,057,909,
184
482,885,4
31
13,736,20
9

1,684,259,
223
402,593,1
05
12,417,95
8

1,257,931,
940
352,934,4
25
733,248

113,361,1
76

98,711,19
0

68,284,66
1

54,532,97
7

34,544,34
0

ROA

0.76%

1.24%

2.07%

2.22%

2.37%

23

Impact of Human Capital Investment on Bank Financial Performances an Empirical Study of Banks in
Bangladesh

ROE
ROI

8.35%
10.86%

13.53%
10.43%

24

20.32%
15.09%

21.65%
13.02%

30.19%
15.67%

Impact of Human Capital Investment on Bank Financial Performances an Empirical Study of Banks in
Bangladesh

In the backdrop of economic liberalization and financial sector reforms, a group of highly
successful local entrepreneurs conceived an idea of floating a commercial bank with
different outlook.
As a fully licensed commercial bank, Prime Bank is being managed by a highly
professional and dedicated team with long experience in banking. They constantly focus
on understanding and anticipating customer needs. As the banking scenario undergoes
changes so is the bank and it repositions itself in the changed market condition.
Prime Bank has already made significant progress within a very short period of its
existence. The bank has been graded as a top class bank in the country through
internationally accepted CAMELS rating. The bank has already occupied an enviable
position among its competitors after achieving success in all areas of business operation.
Prime Bank offers all kinds of Commercial Corporate and Personal Banking services
covering all segments of society within the framework of Banking Company Act and
rules and regulations laid down by our central bank. Diversification of products and
services include Corporate Banking, Retail Banking and Consumer Banking right from
industry to agriculture, and real state to software.

Key IHC
indicato
rs
Salary and
Wages
Bonus and
Allowances
Training
and
Developme
nt
Provident
Fund
Contributio

2013

2012

2011

2010

2009

2,890,838,
916
455,533,5
98
57,079,57
8

2,366,377,
581
326,236,4
50
56,447,06
3

1,784,554,
350
233,409,4
32
27,981,36
9

1,795,575,
637
438,753,9
32
8,866,151

1,313,798,
904
235,572,6
49
1,787,973

107,663,6
02

87,037,24
0

70,074,89
8

61,411,45
8

47,147,85
7

25

Impact of Human Capital Investment on Bank Financial Performances an Empirical Study of Banks in
Bangladesh

n
ROA

ROE
ROI

1.41%
15.85%
9.25%

0.84%
9.29%
6.50%

1.74%
24.77%
9.92%

1.68%
32.28%
13.11%

1.03%
18.49%
10.31%

Results and recommendations

Results discussion:

The study showed the following:


1. There is an awareness of the effectiveness of investment in human capital, as they
agree that human capitalinvestment enhances the capabilities and competencies to
effective outcomes.
2. Investing in training and development has significant effect on human capital return on
investment.
Recommendation:
The following recommendations to shed light the importance of investing in human
capital to decision makers in the commercial banks in Bangladesh:
1) It is important for all investment in staffing, training & development, incentives tobe
aligned with the bank's strategy and objectives.
2) To support and empower the human resources function to implement their plans and
strategies.
3) To publish financial measurements and results of investing in human capital and to
shed light on itsimportance to the stakeholders of the bank.

26

Impact of Human Capital Investment on Bank Financial Performances an Empirical Study of Banks in
Bangladesh

Conclusion
The study was undertaken to find out impact of human capital on firm performance.
The conceptualization of human capitals is closely linked to some fundamentals of
economics and firm performances.
The results of this study support my initial hypothesis that there are reasonably strong
evidences to show that the infusion of human capital enhancement in organizations
promotes innovativeness and greater firm performance.
Studies also clearly substantiate the fact that financial performance is positively impacted
through the consideration of human capitals.
In light of this, the understanding of firm performance in relation to human capitals
should not be regarded as a phenomenon that only add more zeros in a firms profits. It is
rather transforming the entire workforce as the most valuable assets in order for the
organization to pave ways for greater achievements via innovativeness and creativity.
Hence, companies should therefore, come up with some effective plans especially in
investing the various aspects of human capital as not only does it direct firms to attain
greater performance but also it ensures firms to remain competitive for their long term
survival.

27

Impact of Human Capital Investment on Bank Financial Performances an Empirical Study of Banks in
Bangladesh

REFERENCES
1) Abdul-Hameed and Waheed, A. (2011), Employee Development and Its Affect on
Employee Performance A Conceptual Framework International Journal of
Business and Social Science Vol. 2 No. 13 [Special Issue -July 2011] 224.
2) Bapna, R. Langer, N, Mehra, M. Gopal R. Gupta, A. (2009) Examining Return on
Human Capital Investments in the Context of Offshore IT Workers SCECR
conference at the Carnegie Mellon University Srini Raju Centre for Information
Technology and the Networked Economy Indian School of Business.
3) Cuganesan, S., Finch, N., & Carlin, T. (2007). Intellectual Capital Reporting: A
Human Capital Focus Symposium conducted at the meeting of the Allied
Academics International Conference.
4) Diez, J. M., Ochoa, M. L., Prieto, M. B., & Santidrian, A. (2010). Intellectual
capital and value creation in Spanish firms. Journal of Intellectual Capital, 11(3),
348-367.
5) Hendricks, J. A. (1976). The impact of human resource accounting information on
stock investment decisions: An empirical study. The accounting review, 51(2),
292-305.
6) Teixeira, A. (2002). On the link between human Capital and firm performance: A
theoretical and empirical survey. Faculdade de Economia, Universidade do Porto.
Porto, Portugal.

28

Impact of Human Capital Investment on Bank Financial Performances an Empirical Study of Banks in
Bangladesh

Appendices

Table 1: Regression Analysis of ROA


SUMMARY
OUTPUT
Regression Statistics
Multiple R
0.77263262
0.59696116
R Square
5
Adjusted R
0.27453009
Square
8
0.00263638
Standard Error
3
Observations
10
ANOVA
df
Regression

Residual

Total

SS
5.14738E05
3.47526E05
8.62264E05

X Variable 1

Coefficients
0.02489092
5
2.11058E12

Standard
Error
0.003649
959
3.32639E12

X Variable 2

-1.92399E11

1.47007E11

X Variable 3

-1.57549E10

1.55474E10

X Variable 4

-4.80073E11

2.39666E11

Intercept

29

MS
1.28685E05
6.95052E06

t Stat
6.8195088
52
0.6344948
7
1.3087744
64
1.0133461
39
2.0030938
6

Significan
F
ce F
1.851438 0.2570309
107
88

P-value
0.001033
593
0.553650
08
0.247533
73
0.357392
784
0.101537
548

Impact of Human Capital Investment on Bank Financial Performances an Empirical Study of Banks in
Bangladesh

Table 2: Regression Analysis of ROE


SUMMARY
OUTPUT
Regression Statistics
0.575714
Multiple R
719
0.331447
R Square
437
Adjusted R
0.203394
Square
613
Standard
0.064317
Error
724
Observation
s
10
ANOVA
df
Regression

Residual

Total

Intercept
X Variable 1
X Variable 2
X Variable 3
X Variable 4

SS
0.010254
405
0.020683
848
0.030938
253

Coefficien Standard
ts
Error
0.0631467
0.0890451
29
01
2.58933E8.11513E11
11
1.76106E3.58641E10
10
1.83768E3.79298E09
09
5.80546E5.84693E11
10

30

MS
0.002563
601
0.004136
77

F
0.619710879

t Stat
0.709154
444
0.319074
867
0.491037
117
0.484494
948
0.099290
651

P-value
0.509917
0.7625689
74
0.6441920
6
0.6485124
15
0.9247654
93

Significan
ce F
0.668285
481

Impact of Human Capital Investment on Bank Financial Performances an Empirical Study of Banks in
Bangladesh

Table 3: Regression Analysis of ROI


SUMMARY
OUTPUT
Regression Statistics
0.62561256
Multiple R
6
0.39139108
R Square
3
Adjusted R
Square
0.09549605
0.04640323
Standard Error
2
Observations
10
ANOVA
df
Regression

Residual

Total

SS
0.006923
713
0.010766
3
0.017690
013

Coefficients
0.03509290
9

Standard
Error
0.064243
263

-5.10997E11
3.41214E10
7.02216E10
7.18682E10

5.85481E11
2.58748E10
2.73652E09
4.21838E10

Intercept
X Variable 1
X Variable 2
X Variable 3
X Variable 4

31

MS
0.0017309
28
0.0021532
6

t Stat
0.5462504
07
0.8727812
11
1.3187110
99
0.2566093
15
1.7036928
25

Significan
F
ce F
0.803864 0.5717115
092
14

P-value
0.608374
345
0.422708
833
0.244434
458
0.807704
584
0.149164
975