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NAŠE GOSPODARSTVO / OUR ECONOMY 68 (2) 2022
Board Structure and Bank Performance:  
The Mediating Role of Intellectual Capital
Jelena Nikolić
a
, Jelena Erić Nielsen
b
, Jelena Peković
c
a, b, c
University of Kragujevac, Faculty of Economics, Liceja Kneževine Srbije 3, 34000 Kragujevac, Serbia 
jnikolic@kg.ac.rs, jelena_eric@kg.ac.rs, jelenapekipekovic@gmail.com 
                        
ARTICLE INFO
         
Original Scientific Article
Article History:
Received March 2022
Revised April 2022
Accepted May 2022
         
JEL Classification:
M10
M14
G34
         
Keywords:
Corporate governance
Board of directors
Board structure
Intellectual capital
Financial performance
Banking sector 
         
UDK: 005.55:336.71
DOI: 10.2478/ngoe-2022-0009
         
Cite this article as: Nikolić, J., Erić Nielsen, 
J., & Peković, J. (2022). Board Structure 
and Bank Performance: The Mediating 
Role of Intellectual Capital. Naše 
Gospodarstvo/Our Economy, 68(2),  28-42. 
DOI: 10.2478/ngoe-2022-0009. 
         
©2022 The Authors. Published by 
Sciendo on behalf of University of 
Maribor, Faculty of Economics and 
Business, Slovenia. This is an open access 
article under the CC BY-NC-ND license 
(http://creativecommons.org/licenses/
by-nc-nd/4.0/).
         
Abstract
Intellectual capital in the knowledge era is a strategic advantage of board 
structure, which leads to the improvement of a company’s work and the 
achievement of its goals. The aim of this study is to develop a structural 
model that connects the corporate governance, intellectual capital and 
financial performance of the banking sector. Corporate governance is 
conceptualised by the board of directors as the main internal mechanism of 
corporate governance, which is measured by the size of the board of directors, 
the number of independent board members and the female board members. 
Intellectual capital represents a mediator in this model and its efficiency 
is calculated through the Value Added Intellectual Coefficient (VAIC) model, 
while the financial performance of banks is measured through return on 
assets (ROA) and return on equity (ROE). The results of the study conducted 
in 22 Serbian banks between 2015 to 2019 show that the size of the board of 
directors and the number of independent board members have a statistically 
significant impact on intelectual capital (IC), but there is no impact on total 
assets (ROA). The number of women in the board of directors does not have a 
statistically significant effect on either ROA or ROE. The findings also indicate 
that intellectual capital (HCE, SCE, CEE) has a significant mediating role in 
the relationship between board structure and bank performance. The results 
of this study will provide a significant contribution to further investment in 
intellectual capital as the strongest link in achieving positive effects on bank 
performance. 
Introduction
The most important goal of any organisation is to improve financial 
performance. Numerous research studies have been dedicated to the analysis 
of the most important variables that influence these goals. From the corporate 
governance standpoint, in terms of the roles and responsibilities of the board, 
those investigating the influence of board structure on financial performance 
of organisation are among the most relevant.
Based on the view that a solid banking system is a precondition for a strong 
stock market, it is particularly important to analyse the factors affecting bank 
performance.  Banks are the main pillar of a country’s financial system, especially 

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NAŠE GOSPODARSTVO / OUR ECONOMY 68 (2) 2022 Nikolić, J., Erić Nielsen, J., Peković, J.
in the emerging market economies with underdeveloped 
capital markets (Jovković, Vasić & Bogićević, 2021). In the 
banking sector, the board of directors – as an internal 
mechanism of corporate governance – has a significant role, 
hence research into board effectiveness is very important 
for improving financial performance. Therefore, the last 
financial crisis also showed that board of directors did 
not fulfil their role (Festić, Črepinko & Bratina, 2020), i.e. 
their effectiveness needs to be improved. According to the 
traditional research perspective, board effectiveness is 
contingent upon board composition and board size (Nikolić 
& Zlatanović, 2018). 
The traditional perspective further argues that an 
understanding of the structural variables of the board 
was a sufficient basis for defining the principles and the 
formulation of regulations needed for effective corporate 
governance (Babić et al., 2012). Since these characteristics 
determine the effectiveness of the board and consequently 
the banks’ performance, a question arises as to the nature of 
the relationship between the observed variables. In previous 
research studies, it is possible to identify two main research 
directions. The first confirms the negative impact (e.g. 
Staikouras et al., 2007; Pathan, 2009; Stančić et al., 2014), 
while the second research stream argues in favour of the 
positive impact of structural board characteristics on bank 
performance (e.g., Aebi et al., 2012; Adams & Mehran, 2012; 
Minton et al., 2011). In other words, the results of empirical 
studies are often contradictory, therefore it is difficult to 
draw general conclusions about this interdependence. This 
ambiguity and inconsistence in conclusions indicate the 
need for further research efforts in this domain. 
Considering that the board of directors itself represents an 
invaluable human capital resource, while at a same time 
human capital is one of the key components of intellectual 
capital, researchers are focusing more attention on the 
relation between intellectual capital and bank financial 
performance. The responsibility of corporate governance 
is to create and develop intellectual capital (Keenan & 
Aggestam, 2001), which is perceived as a strategic resource 
that is vital for sustainable growth (Zeghal & Maaloul, 2010). 
Accordingly, numerous empirical studies on the impact of 
intellectual capital on financial performance have been 
conducted (Pulic, 2004; Goh, 2005; Amitava & Santanu, 
2012; Nguyen et al., 2017). However, most of those studies 
have investigated the direct impact of intellectual capital on 
financial performance or the impact of corporate governance 
on intellectual capital development, disregarding the 
mediating effects of intellectual capital in the relationship 
between corporate governance and financial success. 
There is significant gap in research of intellectual capital as 
a mediator in understanding the relationship between the 
board of directors as a corporate governance mechanism 
and financial performance. Research studies in this field 
are scarce (Makki & Lodhi, 2014; Nkundabanyanga et al., 
2014; Bhattacharjee et al., 2017) and the lack of systematic 
research is particularly noticeable in transition economies, 
including Serbia. The research purpose of this study is to 
examine the relationship between board effectiveness 
measured on the basis of its structural characteristics and 
the financial performance of banks, with intellectual capital 
viewed as a mediator in this relation. The main goal is to 
determine whether or not the selected board structural 
characteristics have a statistically significant impact on 
the financial performance of banks. The research focus is 
to establish whether intellectual capital has a significant 
mediating role in this relation. The authors’ empirical 
research encompasses 22 out of 26 banks in the Republic 
of Serbia, observed in the period from 2015 to 2019, which 
represents 75.8% of the entire banking sector. The sample 
contains a total of 110 observations during a four-year 
time interval, which is a good basis for making conclusions 
relation to the banking sector. 
The contribution of the paper is reflected in a reduction 
of the existing research gap in the relationship between 
the structural characteristics of the board and the 
financial performance of banks with the mediating effect 
of intellectual capital. Previous research conducted in the 
Republic of Serbia has not dealt with this subject in this 
way, therefore this research represents a positive scientific 
contribution and a direction for further research.
The paper is structured as follows. First, theoretical 
considerations based on a literature review related to board 
structure and bank performance are provided. Second, the 
connection between intellectual capital, board structure 
and bank performance is outlined and elaborated. In the 
following section, the methodology and results of the 
empirical research are provided. Finally, a critical evaluation 
of the findings and a discussion are given, including the 
implications, research limitations and indications for further 
research directions.
Theory and Hypotheses
Board structure and bank performance
Corporate governance is related to the problem of the 
separation of ownership and control, i.e. the main problem 
of ownership dispersion is that owners do not have control, 
which leads to managers behaving opportunistically 
(Nikolić & Babić, 2016). According to the agency theory, 

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NAŠE GOSPODARSTVO / OUR ECONOMY 68 (2) 2022 Nikolić, J., Erić Nielsen, J., Peković, J.
large corporations with dispersed ownership face a conflict 
of interest between owners and managers, or the principal-
agent problem (Jensen & Meckling 1976). Consequently, 
Fama and Jensen (1983) emphasise that monitoring and 
control of managerial decisions represent a basic role of 
the board of directors. However, in line with the stakeholder 
theory, the relevance of the strategic board role is 
implied, highlighting the protection of interest of not only 
shareholders but also of other stakeholders (Babić et al., 
2020). The responsibility of the board of directors can be 
observed through the strategic decision-making process 
(Babić et al., 2011). According to the relevance of board 
effectiveness for improving performance, board structural 
characteristics, such as board size and board composition, 
are an important area of research. Even though different 
indicators for measuring performance can be used 
(accounting vs. market measures), most of the studies carried 
out in emerging countries focus on the monitoring of the 
traditional accounting measures of bank performance, such 
as ROA and ROE. 
Board size represents the total number of board members 
who have the right to vote (Ongore et al., 2014). It is often 
stated that the optimal size of a bank board implies the 
appointment of between 16 and 18 members (De Andres 
et al., 2012). Analysing the interdependence between board 
size and bank performance, the results of existing empirical 
studies are contradictory and often ambiguous. Some studies 
indicate that the higher the number of board members, the 
more effective the board role and improved performance 
(Jadah & Adzis, 2016). In other words, the most pertinent 
advantage of a bigger board is an increased capacity to make 
better strategic decisions and the overall decision-making 
process more effective (Dalton et al., 2005). Moreover, it has 
been confirmed that a larger number of board members can 
have a positive influence on the analysed performance of 
banks (Adams & Mehran, 2012; Aebi et al., 2012). However, a 
larger number of board members can also create issues with 
coordination and communication within an organisation 
(Lipton & Lorsch, 1992; Bushman et al., 2004; Cerbioni & 
Parbonetti, 2007). In addition, the decision-making process 
becomes less efficient, thus deteriorating the ability of the 
board to identify and exploit new business opportunities 
(Bantel & Jackson, 1989; Jensen, 1993; Guest, 2005).  In such 
cases, a large number of board members becomes a huge 
disadvantage, which is reflected in slow and inefficient 
strategic decisions, consequently negatively affecting 
corporate performance (Lipton & Lorsch, 1992; Jensen, 
1993; Yermack, 1996; Eisenberg et al., 1998). In terms of 
bank performance, the empirical research results related to 
the effects of board size on bank performance predominantly 
confirm a negative impact (Hermalin & Weisbach, 2003; 
Pathan, 2009; Manaseer et. al, 2012; Babić et al., 2020). In 
line with the aforementioned, there is a tendency towards 
optimising board size, keeping it between seven and nine 
members (Lipton & Lorsch, 1992; Jensen, 1993). 
The research studies from transition economies also result 
in slightly inconsistent and opposing conclusions. A study of 
74 banks from seven southeast European countries between 
2005 and 2010 revealed a statistically significant negative 
relationship between board size and financial performance 
(Stančić et al., 2014). Another study of 14 Serbian banks 
analysed during a three-year period showed that the 
number of board members does not have a significant 
influence on financial performance (Simić, 2018). Using 
the CAMELS performance measurement model, Babić et al. 
(2020) agree and confirm the negative impact of board size 
on bank performance. Based on the given theoretical review, 
the first research hypothesis was defined:
H1: Board size (BS) negatively affects the financial performance 
of banks (ROA and ROE). 
Board composition represents the relationship between the 
number of non-executives, independent directors (IND) and 
the total number of directors (Aebi et al., 2012; Erkens et 
al., 2012).  To date, research studies have been unclear and 
often inconclusive in relation to the relationship between 
board composition and performance. The assumptions 
about the optimal number of independent members 
differ depending on the perceived role of the board. A 
positive influence of independent board composition 
on performance can be identified in the banking sector 
(Daily & Dalton, 1992; Shungu et al., 2014; Jadah & Adzis, 
2016), due to the fact that independent directors perform 
objective control of managers, consequently leading to a 
reduction in agency costs (Borokhovich et al., 1996; Singh 
& Davidson, 2003). 
Therefore, Borokhovich et al., (1996) emphasise that 
independent board members act in the best interest of 
shareholders, thus reducing agency costs and improving 
company financial performance. Khan & Awan (2012) 
also showed a positive relationship between the number 
of independent board members and some indicators of 
financial performance. In contrast, one stream of empirical 
studies builds on the stewardship theory, claiming that 
managers act in the best interest of owners, hence the 
composition of a board should have a higher proportion of 
internal executive directors, i.e. board members should have 
a clear understanding of their role in corporate governance 
and be able to make good decisions about the affairs of 
the bank. Therefore, non-executive directors devoted 
neither sufficient resources nor time to fulfiling their duties 
(Festić, Črepinko & Bratina, 2020). Abdullah (2004) confirms 

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NAŠE GOSPODARSTVO / OUR ECONOMY 68 (2) 2022 Nikolić, J., Erić Nielsen, J., Peković, J.
that the number of independent board members does 
not have a significant influence on financial performance. 
Moreover, Shukeri et al. (2012) provide evidence that this 
interdependency is negative.  
The empirical evidence from transition economies 
predominantly indicates the insignificant or negative impact 
of a higher number of independent board members on 
financial performance. According to Stančić et al. (2014), the 
number of independent board members does not have a 
significant impact on ROA. Another conclusion of the study 
is that the higher proportion of independent board members 
has a negative influence on financial performance in the 
Serbian banking sector (Simić, 2018). Even though most 
studies could not identify any evidence of a positive influence, 
there is one partial exception. Babić et al. (2020) argue that 
a positive influence can be observed for certain indicators of 
performance in the banking sector. Based on the stewardship 
theory and the conceptual foundation of the aforementioned 
empirical research studies, the authors hypothesise:
H2: The higher number of independent directors (IND) 
negatively affects bank financial performance (ROA and ROE).
The number of women (WOM) as board members has 
been receiving more attention from researchers recently, 
especially in terms of the increasing relevance for improving 
board effectiveness. The traditional conservative perception 
about the negative influence of female board members on 
company financial performance (ROA and ROЕ) has been 
corroborated by some research studies. For example, two 
relevant studies were conducted in the USA; the first 
analysed the financial performance of 127 of the biggest 
companies (Shrader et al., 1997), while the other tracked 
the financial indicators of companies between 1996 and 
2003 (Adams & Ferreira, 2009). However, a research study 
conducted in Great Britain (Haslam & Ryan, 2008) showed 
that the researchers were unable to identify any significant 
relation between the number of female board members and 
ROA/ROE indicators.
Female board members tend to not only demonstrate 
innovativeness and creativity in strategic decisions, but also 
substantial empathy (Saeed et al., 2015). Erhardt et al. (2003) 
analysed 500 companies in the USA over a five-year period 
and concluded that a higher proportion of women in board 
structure has a positive impact on financial performance 
measured by ROA and ROE indicators. Selvam et al. (2006) 
conducted research of selected banks in India, confirming 
the positive impact of female board members on financial 
performance. Even though similar conclusions were made 
based on a research study analysis of 25 Italian groups 
between 2006 and 2010, the number of female directors on 
the boards of Italian banks is still remarkably low (Romano 
et al., 2012). Some researchers have found evidence of a 
positive impact on one of the ROA/ROE indicators. For 
example, Abdullah et al. (2012) conducted research on 
841 publicly listed IPO companies and found evidence of 
a positive impact on overall assets (ROA). At approximately 
the same time, Fidanoski et al. (2014) analysed 35 South 
European companies from Macedonia, Serbia, Croatia, 
Bosnia and Greece, and came to a similar conclusion, i.e. 
that there is positive influence of a higher number of female 
board members on ROA, however, they were unable to find 
any relevant evidence of the influence on ROA. In line with 
the aforementioned theoretical background, the following 
hypothesis was developed:
H3: The higher number of female board members (WOM) 
positively affects the financial performance of banks (ROA and 
ROЕ).
Intellectual capital, board structure and bank 
performance
In the scientific domain of strategic management, the 
concept of intellectual capital (IC) has a significant role, 
however, in the field of corporate governance it has been 
gaining more attention from researchers of late. According 
to the OECD, IC is defined as a combination of structural 
and human capital (Tan, Plowman & Hancock, 2008). This 
classification has been recently revised; therefore, the key 
components of IC are human capital, organisational capital 
and customer capital (Stewartna, 1997). 
In this article, IC is analysed using the Value Added Intelectual 
Coefficient (VAIC) methodology, which is designed to 
determine the contribution of human capital efficiency (HCE), 
structural capital efficiency (SCE) and capital employed 
efficiency (CEE) to value creation in the company (Pulić, 
2004), i.e. the VAIC methodology concerns the efficiency of 
three types of capital (Marzo, 2021): human capital (HC), 
measured by the cost of employees; structural capital (SC), 
equal to the diference between the value added generated 
by the firm and human capital; and physical and financial 
capital employed (CE), i.e. the amount of fnancial capital 
available to the firm. The guiding principle of this model is to 
determine the contribution of all company resources (human, 
structural and physical) to value creation (VA), which is 
obtained as follows: VA = OP + EC + A (OP = Operating profit; 
EC = Employment cost; A = Amortisation). Therefore, the VAIC 
is the result of the sum of three efficiency ratios, all obtained 
through a combination of the value added (VA) with the three 
types of aforementioned capital (Marzo, 2021). 
Human Capital Efficiency (HCE) is obtained as follows: HCE 

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NAŠE GOSPODARSTVO / OUR ECONOMY 68 (2) 2022 Nikolić, J., Erić Nielsen, J., Peković, J.
= VA/HC, i.e. it refers to the amount of earnings of employees 
during one fiscal year. Structural Capital Efficiency (SCE) 
is calculated as follows: SCE = SC/VA. Intellectual Capital 
Efficiency (ICE) is obtained as the sum of HCE and SCE: ICE 
= HCE+SCE. Finally, Capital Employed Efficiency (CEE), is 
derived from the relationship between value added and the 
net assets of the company: CEE = VA/CE. Capital Employed 
(CE) is capital already invested in the business and 
represents the net assets of the company. In order to ensure 
the comparability of the overall value creation of the banks, 
the two aforementioned indicators must be combined: VAIC 
= ICE+CEE (Peković et al., 2020). 
In line with the aforementioned, human capital is seen as an 
investment rather than an expense (Janošević et al., 2013), 
structural capital efficiency is considered from the perspective 
of adding value, while capital employed efficiency reflects 
capital already invested and represents the net assets of 
the company. A number of studies confirm that either IC or 
some of its components have a positive impact on company 
performance, these are most commonly measured with ROA 
and ROE indicators (Pulic, 2004; Goh, 2005; Cardoza, 2006; 
Amitava & Santanu, 2012; Nguyen et al., 2017). 
Several research studies have been conducted in Serbian 
companies in this scientific area. The majority of them, 
mainly in the banking sector, provide evidence of a positive 
influence of individual IC components on certain indicators 
of financial performance, especially on ROE. Peković et al. 
(2020) note a high correlation between the components 
of IC, HCE and CCE on one side, and ROA and ROE on the 
other. However, some researchers came to more ambiguous 
conclusions. Janošević et al. (2013) claim that even though 
components of VAIC have an influence on ROE, apart from 
HCE, they do not affect ROA at all. A recent study of 27 banks 
in the Serbian banking sector between 2008 and 2016 
indicates that the efficient use of IC has a positive impact 
on ROE but a negative effect on ROA (Radić, 2018). 
Considering the relationship between IC and performance, 
numerous research studies have focused on analysing the 
relationship between IC and corporate governance. Abidin 
et al. (2009) found a positive relationship between board 
size, the number of independent board members and IC. 
Similar conclusions were made by Zamani et al. (2012), who 
highlighted that not only board size and the number of 
independent members, but also the duality of the leadership 
position have a positive impact on IC. Appuhami & Bhuyan 
(2015) showed that the number of independent board 
members has a positive impact on IC, however, they were 
unable to identify any significant relevance of board size.  
Taking a closer look at the connection between IC and 
corporate governance, in recent years the relevance of IC as 
a mediator in the relationship between board effectiveness 
and financial performance has been increasingly emphasised. 
Several empirical studies confirmed the positive impact of the 
IC mediating role. Makki & Lodhi (2014), Nkundabanyanga 
(2016) and Bhattacharjee et al. (2017) argue that board 
composition has a positive influence on company financial 
performance, as well as IC as a mediator. Bala et al. (2019) 
confirm that board size and the independence of board 
members affect financial performance, with a mediating 
effect of IC. Iqbal & Zaib (2017) showed that in the banking 
sector, corporate governance reflected through the certain 
characteristics of the board has a significant positive impact 
on IC, and vice versa, i.e. IC also has a positive impact on the 
financial performance of the observed banks. 
Based on the aforementioned, it can be concluded that 
an adequately structured board of directors, with IC as a 
mediator, can significantly contribute to an improvement in 
company financial performance. It is possible to identify a 
significant research gap in this respect in Serbia, not only in 
terms of the direct influence of the board or IC on financial 
performance, but also a more fine-grained understanding of 
the relevant of IC mediating. In accordance with the previous 
considerations, the following hypothesis was formulated:
H4: Intellectual capital (HCE, SCE, CEE) has a significant 
mediating role in the relationship between board structural 
characteristic (BS, IND, WOM) and bank financial performance 
(ROA and ROE).
Figure 1
Conceptual model
HCE SCE
ROA ROE
CEE
Intellectual capital
(VAIC)
BS
IND
Board structure
WOM
Financial
performance
X4
X3
X2
X1
Source: Authors’ own research
Based on the given hypotheses, Figure 1 shows the defined 
conceptual research model. The model investigates the 
SM

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NAŠE GOSPODARSTVO / OUR ECONOMY 68 (2) 2022 Nikolić, J., Erić Nielsen, J., Peković, J.
direct impact of selected board structure characteristics – 
the size (BS), the number of independent board members 
(IND) and the participation of women (WOM) – on financial 
performance in the banking sector, measured by ROA and 
ROE. Intellectual capital is a central component of the 
model (composed of HCE, SCE and CEE), with a mediating 
role between board structure and financial performance.
Research Methodology
Sample structure
The empirical research was carried out on a sample of 22 
banks in the Republic of Serbia. The sample size is relevant, 
considering the substantial change and fluctuations of the 
financial market structure, as well as numerous mergers and 
acquisition. As a result, the number of actively operating 
banks in Serbia is constantly changing. This means that 
collecting longitudinal data about board structure and 
measuring financial bank performance is very challenging. In 
this study, 22 out of the total of 29 banks operating between 
2015 and 2019 were observed, which represents 75.8% of 
the entire banking sector. The sample contains a total of 110 
observations during the four-year time interval. Accordingly, 
the sample is representative and the findings can be 
generalised. Pursuant to the provisions of the Law on Banks, 
banks are obliged to publish annual statements of business, 
apart from regular financial statements, at quarterly and 
annual intervals. For the purpose of this research, the data 
published in these reports are used, while the information 
about board structure (board size and composition) was 
collected via the online available database of the National 
Bank of Serbia. A statistical analysis was conducted using 
STATA (Software for Statistic and Data Science).
Variables
ROA and ROE were used as relevant indicators of bank 
financial performance. Although typical for this type of 
research, the Tobin Q indicator was not used due to the lack 
of information about the market capitalisation of banks. 
Therefore, the ROA and ROE indicators of profitability were 
used as the dependent variables. 
The independent variables are board size (BS - total number 
of board members), board composition (IND - number 
of independent board members) and number of female 
Table 1 
Variables
Symbol Measuring
Dependent variables Financial performance
Return on assets ROA
Return on equity ROE
Independent variables Board structure
Board size BS Number of directors on board
Independent board 
members
IND
Number of female 
board members
WOM
Mediator Intellectual capital
Human capital 
efficiency
HCE VA/HC
Structural capital 
efficiency
SCE SC/VA
Capital employed 
efficiency
CEE VA/CE
Intellectual capital VAIC HCE+SCE+CEE
Source: Authors’ own research
Net income
Total asset
No. of independent directors
No. of directors on the board
No. of female board directors
No. of directors on the board
x 100
x 100
Net income
Average shareholders' equity

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NAŠE GOSPODARSTVO / OUR ECONOMY 68 (2) 2022 Nikolić, J., Erić Nielsen, J., Peković, J.
board members (WOM). Intellectual capital (IC) is used as 
mediator and its efficiency was measured using the VAIC 
methodology. Table 1 shows all the variables used. 
Model specification
This research paper was carried out in order to examine the 
statistical significance and intensity of the impact of the board 
structural characteristic on the indicators of profitablility as 
dependent variables. The regressors in the multiple linear 
regression models are board size (BS), independent board 
memembers (IND) and number of female board members 
(WOM), while profitability was measured by ROA and ROE. The 
same entities (banks) are observed for each period, therefore 
the panel data set is a fixed panel (Greene, 2008). 
To verify the direction of causality and to control the 
endogeneity bias, the lagged value of a regressor is included 
and the model accounted for the heteroscedasticity 
problem (Andries et al., 2018). To test H1, H2 and H3, which 
predict the effect of the independent variables on banking 
performance, the authors estimated a series of equations (6) 
using the following regressions: 
Hypothesis 1
ROA
it
= α + ß
1
* BS
it
+ μ i
+ λ
t
+ ɛ
it
; ROE
it
= α + ß
2
* BS
it
+ μ i
+ λ
t
+ ɛ
it
;
Hypothesis 2
ROA
it
= α + ß
3
* IND
it
+ μ i
+ λ
t
+ ɛ
it
; ROE
it
= α + ß
4
* IND
it
+ μ + λ
t
+ ɛ
it
;
Hypothesis 3
ROA
it
= α + ß
5
* WOM
it
+ μ i
+ λ
t
+ ɛ
it
; ROE
it
= α + ß
6
* WOM
it
+ μ + λ
t
+ ɛ
it
;
OR
ROA
it
= α + ß
n
*IV
it
+ μ i 
+ λ
t
+ ɛ
it
; ROE
it
= α + ß
n
* IV
it
+ μ i
+ λ
t
+ ɛ
it
;
In the equations, ROA refers to return on asset and ROE refers 
to return of equity for bank i at time t. The independent IV 
variables (BS, IND, WOM) are already explained, α and ß are 
regression parameters, μ i 
+ λ
t
 are individual and time fixed 
effects, and ɛ refers to the error term.
In order to test H4, the authors applied the Baron and Kenny 
(1986) method to assess the mediation effect of IC on the 
relationship between the board structural characteristic 
(BSC) and Serbian banking performance. The impact of 
board size, independent board members and number 
of female board members (independent variables) on 
intellectual capital (mediator) was evaluated by estimating 
a series of regressions of IC on CG and banking performance 
by using the Sobel test. Figure 2 shows an illustration of 
mediation using the Sobel test, where a, b, and c' are the 
path coefficients. The values in parentheses are standard 
errors of these path coefficients.
Figure 2 
Sobel test (an illustration of mediation)
MEDIATOR
Intellectual capital
(VAIC)
Dependent variable
Financial performance
Independent variable
Board structure
Z
a (Sa) b (Sb)
c’
Source: Authors' own research
Description of numbers:
a = raw (unstandardised) regression coefficient for the 
association between independent variable and 
mediator
s
a
 = standard error of a
b =  raw coefficient for the association between the mediator 
and the dependent variable (when the independent 
variable is also a predictor of the dependent variable)
s
b
 = standard error of b
c'  the direct effect of the irrationality on the self-reported 
anxiety
z = the mediated effect divided by its standard error yields 
a z-score of the mediated effect
SQRT = Square root
* s
a
 and s
b
 should never be negative
Hypothesis 4
z-value = a * b ∕ SQRT(b
2
* s
a
2
 + a
2
* s
b
2
) 
Research Results
Table 2 illustrates the results of the descriptive analysis of 
ROA and ROE as dependent variables, and three independent 
variables (BS, IND, WOM) for the entire sample, within and 
between the observed banks. 
Table 2 shows the low mean score for ROA (overall) indicating 
that there was a minor increase in banks’ profit within the 
period of observation. The standard deviation further depicts 
a slight variation between the sample banks. The ROE has a 
mean score of 2.78%, while the result of ROE shows that the 
deviation from the standard deviation has a higher variation 
between the sample banks compared to ROA. BS indicates 
that the average size is six, while the maximum number is 
SM

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NAŠE GOSPODARSTVO / OUR ECONOMY 68 (2) 2022 Nikolić, J., Erić Nielsen, J., Peković, J.
nine. The IND variable shows that, on average, there are two 
independent board members (the maximum is four). The 
analysis shows that there, on average, there is one woman 
on the board (WOM) (the maximum is four).
Table 3 shows the descriptive statistics for the VAIC model 
(overall) and the IC components (SCE, CEE and HCE) 
individually. The results show that the mean value of VAIC is 
3.17 and its S.D is 0.319316. All three of the components of 
VAIC have a significant value for the given results.
Table 4 shows the results of multiple regression used to 
analyse the structural board characteristics (BS, IND, WOM) 
on bank financial performance (ROA and ROE). The results 
indicate that the board size and number of independent 
directors have a significant influence on ROE, however, they 
do not have a statistically significant influence on ROA.
The authors used the Sobel test to evaluate the mediating 
influence of IC (HCE, SCE и CEE) in the relation between board 
structure characteristics (BS, IND, WOM) and bank financial 
performance (ROA and ROE). First, a simple regression analysis 
was conduced to test the influence of BS, IND and WOM on 
IC (Table 5). The value of the coefficient of determination 
(R
2
) is 0.281, which means that 28.1% of the IC variability is 
explained by the defined regression model. Board structure 
characteristics (ß=0.311, p=0.000) have a positive statistically 
significant influence on intellectual capital. 
Next, in order to analyse board structure characteristics and IC 
components on bank financial performance, a multiple regression 
analysis was conducted. The results are shown in Table 6.
Table 2 
Descriptive statistics of dependent and independent variables
Depend. Var. Mean Std. Dev. Min Max
ROA
Overall 0.00055733 0.019596 -0.12523 0.12100
Between 0.006892 -0.06848 0.02260
Within 0.019363 -0.08079 0.02678
ROE
Overall 0.027818 0.133471 -0.23822 0,283655
Between 0.105745 -0.20732 0.136008
Within 0.122774 -0.21828 0.189470
Indep. Variables Mean Std. Dev. Min Max
Board size (BS)
Overall 6.072727 0.5550358 5 9
Between 0.59082594 5 8.2
Within 0.3426823 3.872727 6.872727
Indep. Board (IND)
Overall 2.318182 0.4533633 1 5
Between 0.4346112 1 4
Within 0.318418 1.518182 2.918182
Women (WOM)
Overall 1.090909 1.310126 0 4
Between 1.039647 0 3.4
Within 0.8217234 0.309091 3.290909
Source: Results of analysis conducted by the authors in STATA software

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NAŠE GOSPODARSTVO / OUR ECONOMY 68 (2) 2022 Nikolić, J., Erić Nielsen, J., Peković, J.
Table 3
Descriptive statistics, mediating variable components 
Mediating Variable Mean Std. Dev. Min Max
HCE
Overall 1.99905 0.128365 -3.025052 17.20192
Between 0.085657 -0.9059412 6.899722
Within 0.0894186 -1.599324 14.42544
SCE
Overall 0.850859 0.156312 -4.730294 19.55603
Between 0.303047 -0.3491662 5.997965
Within 0.736104 -3.759164 11.73104
CEE
Overall 0.3494002 0.7594304 -0.2228807 4.766916
Between 0.3666695 -0.109158 1.815902
Within 0.6775965 -0.2193201 3.300414
VAIC
Overall 3.170164 0.319316 -4.54887 19.4995
Between 0.011836 -0.208771 8.071101
Within 0.668127 -2.193201 7.6868
Source: Results of an analysis conducted by the authors in STATA software
Таble 4
Multiple regression analysis
Variable ROA ROE
Coefficient T-value Sig Coefficient T-value Sig
BS -0.82 -0.26 0.784 -2.55* -2.84 0.003
IND -0.74 -0.22 0.811 -2.66* -3.01 0.001
WOM 0.69 0.19 0.853 3.88 0.25 0.565
Note: a statistically significant level of 0.01
Source: Authors’ own research
Table 5
Simple regression analysis (dependent variable: Intellectual capital)
Independent variables B p value
BS
Board structure 
characteristics
0.311* 0.000 IND
WOM
Note: significance level 0.01 R
2
 = 0.281
Source: Authors’ own research
Table 6
Multiple regression analysis (dependent variable: Financial 
performance of banks)
Independent variables B p value VIF
BS / IND / WOM 0.284 0.000 1.325
HCE / SCE / CEE 0.368 0.000 1.241
Note: significance level 0.01 R
2
 = 0.451
Source: Authors’ own research

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NAŠE GOSPODARSTVO / OUR ECONOMY 68 (2) 2022 Nikolić, J., Erić Nielsen, J., Peković, J.
The value of the coefficient of determination (R
2
) is 0.451, 
therefore 45.1% of the variability of banks’ financial 
performance is explained by the regression model.  The value 
of VIF is always less than 5 (Aiken & West, 1991), therefore 
there is no problem of multicollinearity. Board structural 
characteristics (ß=0.284, p=0.000) and intellectual capital 
(ß=0.368, p=0.000) have a statistically significant influence 
on bank statistical performance. 
Table 7 shows the Sobel test used for analysis of the 
mediating role of IC in relation to board structure 
characteristics and bank financial performance. 
confirmed. In other words, boards with fewer board members 
tend to be more effective in the decision-making process, 
since critical strategic decisions are made promptly and 
more efficiently. These findings are in line with prior 
similar empirical studies (Yermack, 1996; Hermalin & 
Weisbach, 2003; Staikouras et al., 2007; Manaseer et al., 
2012,), especially studies of bank corporate governance in 
emerging economies (e.g. Pathan et al., 2007; Pathan, 2009, 
Stančić et al., 2014; Simić, 2018). The results support the 
view that excessive boards often experience problems with 
coordination, control and flexibility in decision-making. It 
means that smaller boards are more effective in monitoring 
managers, thus contributing to overall profitability.
Hypothesis H2, relating to the influence of independent 
board members on ROE, is also partially confirmed. The results 
indicate that a higher proportion of independent board 
members does not have a significant impact on ROA. At a 
same time, evidence was found that a substantial negative 
impact on ROE can be found. This means that an improvement 
in bank performance can be attained through the definition 
of standards referring to board size, as well as the number 
of independent board directors. These conclusions are 
aligned with other previous studies conducted by Abdullah 
(2004), Shukeri et al., (2012), Simić (2018), while some 
researchers claim that board structure has no influence on 
bank profitability in South European economies (Stančić et 
al., 2014). This is surprising given the findings of previous 
studies that find a significant and often positive influence 
of board independence over bank profitability in emerging 
economies (Bektas & Kaymak, 2008; Pathan et al., 2007). A 
lack of interdependence between board independence and 
bank profitability implies that in emerging economies, due 
to weak legislation, boards tend to be overruled by their 
dominant shareholder, imposing their own interests and 
exercising excessive control. 
Therefore, hypothesis H3 is completely rejected, because 
the number of female board members does not have 
a significant impact on either ROA or ROE. A partial 
explanation for this conclusion might be the fact that 
women are heavily underrepresented as board members in 
the Serbian banking sector. Consequently, it is difficult to 
adequately assess and evaluate their contribution to board 
effectiveness and financial performance. Based on the 
research results, the recommendation would be not only to 
increase the number of female members, but also to focus 
more on their realistic contribution to the decision-making 
process. Better communication, improved interpersonal 
relations and increased diligence in persuading or problem 
solving are the key benefits deriving from a higher number 
of women on the board, including a positive impact on the 
effectiveness of the board.
Table 7
Sobel test (mediator: Intellectual capital)
Inputs Value Sobel test 
results
Value
a 0.311 z-score 4.43
b 0.368 Std. deviation 0.025
Sa 0.059 p value 0.00
Sb 0.045
Source: Authors’ own research
The results indicate that the z-score is 4.43 (if the z-score 
is greater than 1.96 it can be concluded that the effect is 
larger than would be expected by chance, thus the effect 
can be classed as significant (Krull & MacKinnon (1999)) 
and the p value=0. Therefore, based on the Sobel test, the 
authors concluded that intellectual capital has a significant 
mediating role. Mediation occurred (Sobel, 1982; Baron 
& Kenny, 1986) because the independent variable board 
structure significantly affects the mediator IC, the board 
structure significantly affects the dependent variable 
financial performance in the absence of the IC, the mediator 
has a significant unique effect on the financial performance 
and the effect of board structure financial performance 
shrinks upon the addition of IC to the model. The Sobel 
test clearly demonstrates the relevance of IC mediation 
(Preacher & Hayes, 2004).
Discussions 
According to the analysed data related to hypothesis 
H1, it can be concluded that board size does not have a 
significant influence on overall invested assets (ROA), 
whereas it not only has a significant but also a negative 
impact on invested capital (ROE). Therefore, the hypothesis 
in relation to the influence of board size on ROE is partially 

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NAŠE GOSPODARSTVO / OUR ECONOMY 68 (2) 2022 Nikolić, J., Erić Nielsen, J., Peković, J.
The empirical results reveal that intellectual capital has a 
significant mediating role between the characteristics of 
corporate governance and the financial performance of 
banks, thus confirming hypothesis H4. The identified relations 
between board structure and composition on the one side, and 
financial performance on the other, are consistent with Makki 
& Lodhi (2014), Nkundabanyanga (2016) and Bhattacharjee 
et al. (2017). Firm performance can be increased by leveraging 
IC and insisting on effective board governance, however, 
numerous studies explaining firm performance via board 
governance ignored and neglected the potential synergistic 
effects. The authors also note that IC is not only generated by 
company staff, but also board members through contributing 
with knowledge, experience and networking to build IC, and 
consequently supporting the company through effective 
monitoring, advising and providing resources. In this sense, 
the board serves as a source of IC for a company, being the 
main internal corporate governance mechanism triggering 
value creation.
Conclusion and Implications
The results have important scientific and practical 
implications, providing evidence to support theories 
relevant to explaining the financial performance of banks. 
The study proved that the combination of IC can be explored 
through a multi-theoretical approach to the agency theory 
and resource-based theories. A unique contribution of this 
study is the investigation of the mediating role of IC in 
the relationship between the characteristics of corporate 
governance and financial performance of the banking 
sector in the Republic of Serbia. This is especially relevant 
considering that the mechanisms of corporate governance 
in Serbia are still developing, with IC capital still largely 
neglected. Considering that these kind of research studies in 
Serbia are still insufficient and scarce, this study is of greater 
scientific relevance. The significant practical implications 
shed more light on IC, its components and interdependence 
with the structural characteristics and effectiveness of the 
board, subsequently affecting overall financial outcome. 
The obtained results show that the board structure is an 
important determinant of bank success. More precisely, 
an effective board of directors – as an internal corporate 
governance mechanism – is a necessary precondition for 
improving the performance of banks, which can consequently 
mitigate the negative effects of the financial crisis and the 
overall turbulence facing the financial sector. At the same 
time, considering that intellectual capital is a priceless 
intangible asset that brings game-changing value to a 
company, it is not only necessary to effectively manage the 
board of directors, but also IC. The size and independence 
of the board combined with human capital – as one of the 
three components of IC – can significantly contribute to the 
improved financial performance of banks. Accordingly, the 
conclusions relating to the interdependence between the 
board structure, and the components of IC and financial 
performance as indicators of business success provide 
a significant recommendation for defining guidelines 
to improve corporate governance that will lead to better 
financial results.
This study has certain limitations. First, it only focuses on 
the banking sector, disregarding other financial and non-
financial institutions, hence the conclusions cannot be 
used as generalisation for entire financial sector. Next, for 
the purpose of measuring financial performance, only ROA 
and ROE were applied. In further studies other indicators 
should be considered: Tobin’s Q, ROI, profit margin, earning 
per share (EPS) and other, relevant for the banking sector 
(overall risk and yield). Even though a time span of five 
years is relevant, future studies should cover a longer 
period and appropriate statistical tools, panel regression 
with fixed and random effects. The VAIC method is widely 
recognised and implemented in IC research, but researchers 
have also recognised substantial disadvantages. Using this 
methodology is justified predominantly for the purpose of 
comparability with other similar studies, however in future 
other methods, such as CIV (Calculated Intangible Value) 
and EVA (Stewart, 1997), could also be used.
Even though mainstream research finds that board structure 
is the key board effectiveness factor, the empirical research 
dichotomy indicates that it is a significant but not the only 
relevant factor. Furthermore, those studies mainly focus 
on a limited number of board structural characteristics. 
Simultaneously with the development of the behavioural 
perspective, research turned more toward the individual 
characteristics of board members and the processes inside 
the board (Babić et al., 2012). Within the behavioural 
perspective, IC emerged as a significant factor for a more 
fine-grained understanding of the relationship between 
board structure and financial performance. Starting 
from the ownership structure and boards of directors as 
complementary mechanisms of corporate governance, as 
well as their relation to strategic management (Ravasi & 
Zattoni, 2006; Pugliese et al., 2009; Nikolić & Babić, 2016), 
further research efforts should focus more on ownership 
activism and ownership type as variables that influence the 
relationship between board structure, intellectual capital 
and financial performance.

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NAŠE GOSPODARSTVO / OUR ECONOMY 68 (2) 2022 Nikolić, J., Erić Nielsen, J., Peković, J.
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NAŠE GOSPODARSTVO / OUR ECONOMY 68 (2) 2022 Nikolić, J., Erić Nielsen, J., Peković, J.
Struktura upravnega odbora in uspešnost bank: 
posredniška vloga intelektualnega kapitala
Izvleček
Intelektualni kapital v dobi znanja je strateška pridobitev strukture upravnega odbora, ki vodi k izboljšanju dela podjetja in 
doseganju njegovih ciljev. Cilj te študije je razviti strukturni model, ki povezuje korporativno upravljanje, intelektualni kapital 
in finančno uspešnost bančnega sektorja. Korporativno upravljanje je zasnovano z upravnim odborom kot glavnim notranjim 
mehanizmom korporativnega upravljanja, ki se meri z velikostjo upravnega odbora, številom neodvisnih članov upravnega 
odbora in številom žensk v upravnem odboru. Intelektualni kapital je v tem modelu posrednik, njegova učinkovitost pa se 
izračuna z modelom intelektualnega koeficienta dodane vrednosti (VAIC), medtem ko se finančna uspešnost bank meri z 
donosnostjo sredstev (ROA) in donosnostjo kapitala (ROE). Rezultati študije, izvedene v 22 srbskih bankah med letoma 2015 
in 2019, kažejo, da imata velikost upravnega odbora in število neodvisnih članov upravnega odbora statistično značilen 
vpliv na intelektualni kapital (IC), ni pa vpliva na celotna sredstva (ROA). Število žensk v upravnem odboru nima statistično 
značilnega vpliva niti na ROA niti na ROE. Ugotovitve kažejo tudi, da ima intelektualni kapital (HCE, SCE, CEE) pomembno 
posredniško vlogo v odnosu med strukturo upravnega odbora in uspešnostjo banke. Rezultati te študije bodo pomembno 
prispevali k nadaljnjemu vlaganju v intelektualni kapital kot najmočnejšim členom pri doseganju pozitivnih učinkov na 
uspešnost bank.
Ključne besede: upravljanje podjetij, upravni odbor, struktura upravnega odbora, intelektualni kapital, finančna uspešnost, 
bančni sektor