The Effect of Managerial Competence on Value-Based Financial Performance of Banks: The Mediating Role of Sustainable Competitve Advantage

Abstract

By identifying key mediators and moderators in the relationship between managerial competence (MC) and value-based financial performance (VBFP) proxied by economic value added (EVA), market value added (MVA) and cash value added (CVA) in the banking sector, this study extrapolates the literature and provides an enriched understanding of the MC and VBFP literature. By conceptualizing sustainable competitive advantage (SCA) construct proxied by intellectual capital (IC), innovation (IN), business intelligence (BIN) and brand image (BIM), and clarifying the relationship with MC and VBFP, this study has a significant role in weakening the unknown side of SCA and its overlap with other similar concepts. Regarding the challenging nature of the ways to gain and maintain competitive advatnage through intangibles, this study fills the gap. The multi-phase survey was conducted using nine (9) fully licensed banks in Ghana. In addition, the bootstrap method was used to assess the mediation effect of BIN, BIM, IN and IC. The authors examined a moderate mediation model to determine whether the effect of MC on EVA, MVA and CVA was as a consequence of BIN, BIM, IN and IC using SPSS v21. The findings underscore the importance of the MC in the VBFP of commercial banks. First, BIN, BIM, IN and IC enhance the MC of firms. Second, MC has an indirect effect on VBFP with BIN, BIM, IN and IC. Among the things that mediate the relationship between MC and VBFP are IC (proxied by structural, human and relational capital), IN (proxied by incremental and radical innovation), BIN and BIM. Overall, MC and SCA (BIN, BIM, IN and IC) are strong predictors of VBFP of banks in Ghana. The study employed only a single research methodological approach, therefore future research could be undertaken using a mixed approach and triangulate to compare findings.