180 Int. J. Intellectual Property Management, Vol. 15, No.

2, 2025

Corporate governance and intellectual capital

efficiency: empirical evidence from Palestine

Raed Abdelhaq, Ammar Salem,

Duha Rabaia and Lina Jardaneh
College of Graduate Studies,
An-Najah National University,
Nablus, Palestinian Authority, Palestine
Email: [Link]@[Link]
Email: [Link]@[Link]
Email: [Link]@[Link]
Email: Leenayjar@[Link]

Abdulnaser Ibrahim Nour*

Department of Accounting,
Faculty of Business and Communication,
An Najah National University,
Nablus, Palestinian Territory, Palestine
Email: [Link]@[Link]
*Corresponding author

Abdalmuttaleb M.A. Musleh Al-Sartawi

Accounting Finance and Banking Department,
College of Business and Finance,
Ahlia University,
Manama, Kingdom of Bahrain
Email: amasartawi@[Link]

Abstract: This paper aims to examine the association between corporate

governance (CG) and intellectual capital (IC) efficiency in the context of
Palestine. The study sample consist 43 firms, which listed in Palestine Stock
Exchange (PEX) over the period 2013 to 2022, totalling 430 observations.
Utilising the value-added intellectual coefficient to measure IC – encompassing
human, structural, and employed capital – and robust regression analysis
through STATA software. Findings indicate a significant association between
IC and both board gender diversity and board education, while board size and
CEO duality appear associated. These insights offer practical guidance for
regulatory bodies, management, and shareholders, especially serves the Capital
Market Authority in supporting the implementation of the five-year financial
technology strategy, as this study provides empirical evidence to support this
initiative at the appropriate time. This novel research enhances understanding
of CG’s impact on IC in emerging markets, a relatively unexplored area in
existing literature. In particular, to the authors’ knowledge, this study is the first
in Palestine that explore the association between IC and CG.

Copyright © 2025 Inderscience Enterprises Ltd.

Corporate governance and intellectual capital efficiency 181

Keywords: corporate governance; intellectual capital efficiency; Palestine

Stock Exchange; PEX; Palestine.

Reference to this paper should be made as follows: Abdelhaq, R., Salem, A.,
Rabaia, D., Jardaneh, L., Nour, A.I. and Al-Sartawi, A.M.A.M. (2025)
‘Corporate governance and intellectual capital efficiency: empirical evidence
from Palestine’, Int. J. Intellectual Property Management, Vol. 15, No. 2,
pp.180–203.

Biographical notes: Raed Abdelhaq is a PhD candidate at the Al-Najah

National University. He completed both his Bachelor’s and Master’s degrees at
the Al-Najah University. Since 2019, he has been serving as a Lecturer at the
same institution, seamlessly integrating theoretical knowledge with practical
applications. His experience in the accounting field is extensive, having worked
as an accountant in one of the largest Palestinian companies. His research
interests are centred on corporate governance and voluntary disclosure fields,
areas where he is committed to making significant contributions.

Ammar Salem is a PhD candidate at the Al-Najah National University. He

pursued his Bachelor’s in Accounting at the Arab American University and
furthered his studies with a Master’s degree in the same field at Middle East
University. For the past seven years, he has been imparting knowledge as a
Lecturer at the Accounting Department of Palestine Technical University –
Khadouri. He is deeply involved in numerous research projects and interests,
specifically focusing on financial auditing and analysis.

Duha Rabaia is a PhD candidate at the Al-Najah University in Palestine, with a

keen research interest in corporate governance and corporate failure field. She
obtained her Bachelor’s degree with honour rank from the American University
and completed her Master’s at Al-Najah University. She has applied her
academic knowledge practically, working in a tax and accounting services
office. She secured first place in a governance competition organised by the
PCMA, highlighting her dedication and expertise in enhancing governance
practices.

Lina Jardaneh is a PhD candidate at the Al-Najah University. She obtained her
MBA degree from the Arab American University. With over ten years of varies
experience, she has held the position of the Financial Manager at the Jordan
Kuwait Bank, where she demonstrated her expertise in financial management.
Her excellence in research was recognised when she received the prize for
scientific research in 2019. Her research interests are primarily focused on the
banking sector.

Abdulnaser Ibrahim Nour is the Head of Accounting Department at An-Najah

national university. Moreover, He is the Editor-in-Chief of An-Najah
University for Law and Economics Journal, is an interdisciplinary hybrid
open-access scientific journal of An-Najah University. He worked as the Dean
Faculty of Business at Middle East University and Al-Ahliyya Amman
University and Dean of Graduate Studies in Zarqa University – Jordan, he has
published more than 100 articles in both Arabic and English languages in local
and international journals. He has published more than eight books in
accounting, finance, management, and sustainable development fields. His
research interests are broadly in the fields of corporate governance, intellectual
capital, audit committee, financial disclosure and research methods. He is a
member of various editorial boards and technical committees in international
refereed journals and conferences.
182 R. Abdelhaq et al.

Abdalmuttaleb M.A. Musleh Al-Sartawi is the Chairperson of the Accounting,

Finance and Banking Department at Ahlia University, the Kingdom of Bahrain.
He is ranked by the Stanford University as one of the World’s Top 2%
Scientists in 2022 and 2023. Moreover, he is the Editor-in-Chief of the
International Journal of Electronic Banking (IJEBank), Inderscience and
associate editor of the Journal of Sustainable Finance and Investment, Taylor
& Francis. He received his PhD in Accounting from the University of Banking
and Financial Science (UBFS). He has presented and published many papers in
regional and international conferences and journals. In addition, he is the Chair
and editor of two international conferences: the European, Asian, Middle
Eastern, North African Conference on Management and Information Systems
(EAMMIS) and the International Conference on Global Economic Revolutions
(ICGER). He is a member of various editorial boards and technical committees
in international refereed journals and conferences.

1 Introduction

By the beginning of the 21st century, the expression ‘knowledge is power’ resonates
profoundly (Holmes, 2020). Acknowledging knowledge as a critical organisational asset
for competitive advantage has shifted the focus towards nurturing intellectual capital (IC)
efficiency through systematic approaches to manage knowledge activities (Buallay, 2018;
Al Momani et al., 2021a). Governing bodies, especially boards, are found to generate IC
through their education, experience, and networks, effectively monitoring, advising, and
contributing resources to promote value creation and stakeholder interests (Berezinets
et al., 2016). For those reasons, several studies emphasised the need to understand the
role of corporate governance (CG) in effectively engaging, defending, and maintaining
the IC of the organisation’s (Saruchi et al., 2019; Alqaraleh et al., 2020).
IC is an essential resource for value creation and competitive advantage in
corporations, encompasses four dimensions: structural, human, social and psychological
capital (Jaradat and Alzeer, 2020). Human resources form a critical component of a
company’s IC, emphasising the importance of creativity, talent, skills, expertise and
innovation (Jaradat and Alzeer, 2020; Pasban and Nojedeh, 2016). The competitive edge
in information technology derived from IC, sourced from employees, networks, and
structures, underscores its fluctuating nature as a primary method for overcoming
competitors (Jordão and de Almeida, 2017). While human resources hold significant
intangible value for companies due to their knowledge, skills, and innovations, debates
persist regarding whether employees’ competence belongs to company assets (Guo and
Chen, 2022). Structural capital, identified as organisational capital, is what remains
within the company after employees depart, including non-tangible assets resulting from
the company’s creativity through research and development, such as patents, trademarks
and distribution networks (Anwar and Siddiqui, 2020). Structural capital, interconnected
with human capital, comprises assets that enhance intellectual performance and
execution, including databases, organisation charts and reputation (Ahmed et al., 2020;
Guo and Chen, 2022). Capital employed, representing financial resources required for
effective business operation, is integral (Shahwan and Habib, 2020). It encompasses the
total invested capital by the company in assets minus liabilities, defining the equity and
debt utilised by the business (Okpe et al., 2022).
 Corporate governance and intellectual capital efficiency 183

IC critical role in CG is evident, influencing a company’s capabilities and resources,

primarily managed by its board of directors (Borlea et al., 2017; Ciftci et al., 2019).
Boards ensure improved decision-making by managers to increase shareholders’ interest
through efficient use of IC (Buallay and Hamdan, 2019). Governance structures, such as
board characteristics, play a pivotal role in monitoring and serving the company,
enhancing overall business outcomes (Shaukat et al., 2016). In Palestine, the
implementation of CG began in 2009, aiming to enhance investment circumstances,
activate financial market performance, expand it, and increase the competitiveness of the
economy by boosting customers’ confidence in companies and their ability to face risks.
These rules are supervised by the Capital Market Authority (PCMA) and applied by
public joint-stock companies (listed and non-listed) in the Palestine Stock Exchange
(PEX), mortgage companies, financial leasing companies, and securities companies
(National Corporate Governance Committee, 2009). In particular, Abualhassan et al.
(2024) highlight the challenges faced by the Palestinian economy. Whereas, the country’s
status as an emerging country under occupation leads to high unemployment among
skilled young people, causing uncertain emigrations seeking better work environments
and higher wages (Jabarin et al., 2019; Mohammad et al., 2024). However, developing
innovative solutions to attract and retain skilled labour is vital for the Palestinian
economy’s long-term success. From this perspective, effective governance should
encourage the establishment of a stable and attractive work environment for skilled
talents, fostering the utilisation and development of IC within companies. By achieving a
balance and efficient utilisation of IC, companies can enhance their competitiveness,
achieve sustainable growth, and foster innovation amid the challenging economic
conditions facing the Palestinian economy (MAS, 2023).
Numerous studies in the Western social and political context explore the link between
CG and IC. However, research is lacking in transitional or emerging countries, where
differences in market involvement, information efficiency, volatility and overall size exist
(Buallay, 2018; Orazalin and Mahmood, 2019; Pillai and Al-Malkawi, 2018). Addressing
this gap, this study investigates the CG and IC relationship in Palestine. Limited research
is dedicated to examining the link between CG and IC in emerging countries.
Nevertheless, in a similar way to Palestine’s economy as its emerging economy.
Furthermore, Nour et al. (2022a) examined the impact of CG mechanisms on IC in
Jordan economy. Results revealed significant correlations between CG mechanisms and
IC, with company size playing a role. In addition, Shahwan and Habib (2020) found no
significant improvement in CG and IC practices’ efficiency on the probability of financial
distress for Egyptian Exchange companies, with efficiency scores indicating a negative
association. Moreover, Dalwai and Mohammadi (2020) performed a study in Oman,
revealed a significant association between board size, audit committee meetings, and IC
efficiency in Oman’s financial sector companies. Banks effectively leveraged efficiency,
but limited support for agency and resource dependency theories.
In summary, these studies collectively contributed to understanding the complicated
relationships between CG, IC, and various dimensions across different emerging
economic contexts, providing valuable insights into the significance of IC and CG
practices. Furthermore, PCMA in Palestine launched an initiative in 2021 named
‘Ebtaker’. The initiative aims to enhance communication between PCMA and innovative
Palestinians individual, for attracting talented and qualified people. This initiative
continues for five years until 2025 (Palestinian Capital Market Authority, 2023).
184 R. Abdelhaq et al.

Therefore, this study provides empirical evidence to support this initiative at the
appropriate time. In light of this, the current study aims to provide empirical evidence
from Palestine regarding the association between CG and IC. It seeks to examine the
relationship between IC and various CG elements. CG factors included board size, CEO
duality, gender diversity, and education, in a comprehensive manner. The study
contributing valuable insights to the understanding of IC and CG practices in the
Palestinian context.
The upcoming sections of the article are structured as follows: Section 2 includes a
literature review and hypotheses development, Section 3 outlines the methodology of the
study, Section 4 presents the results, and Section 5 summarises the conclusions and offers
recommendations.

2 Literature review and hypothesis development

This part discusses the theoretical framework of previous studies and theories that explain
the association between CG and IC, in addition to developing appropriate hypotheses. In
addition, Figure 1 shows the research framework.

Figure 1 Research framework

Corporate governance

Board size (1)

Dependent variable
CEO duality (2)
H1, H2, H3, H4
Intellectual capital
efficiency
Board diversity (3)

Board education (4)

Control variable

Firm size Profitability

2.1 CG and IC
The integration of the perspective of the agency theory and resource dependency theory,
as a theoretical framework presents valuable insights about the association between CG
and IC efficiency. In the context of agency theory, Jensen and Meckling (1976) proposed
that this framework elucidates how CG affects IC. They captured agency theory as an
information asymmetry between ownership (principals) and management (agents).
Principals carry the firm’s risks because of their lack of management knowledge (Fama
and Jensen, 1983). Briefly, CG frameworks are essential for keeping a focus on
 Corporate governance and intellectual capital efficiency 185

management effectiveness and protecting the interests of shareholders (Pfeffer and

Salancik, 1978). For ensuring effective oversight, CG facilitates the efficient utilisation of
resources and provides guide strategic decisions aimed to create value for firm. This
emphasis aligns with the notion that strong CG can enhance the efficiency of IC, as it
directs resources toward value-creating activities (Asa’d et al., 2023; Al Momani et al.,
2021b). Additionally, from resource-dependency-theory views, boards of directors play a
critical role as intermediaries for the firm’s access to external resources, as per the
resource dependence hypothesis (Bussoli et al., 2023; Munir et al., 2020). Through these
relationships, firms can obtain many resources that are needed to achieving strategic
goals and improve the efficiency of their IC. Moreover, by establishing strong board
relation with other firms, businesses may use outside resources to enhance their IC and
become more competitive in the market. Furthermore, studies based on the resource
dependence theory emphasise ensure the important of human resources to gaining a
competitive advantage (Zahra and Pearce, 1989). Strong CG practices have the potential
to improve human resource management, thus enhancing the company’s IC. However,
CG frameworks are essential because they prioritise the effective use of human resources
and promote an innovative and talent-development culture, which all help to improve IC.
In summary, agency theory and resource dependence theory both emphasise the critical
role of CG is for controlling agency costs, gaining access to internal-external resources,
and making the best use of human resources – all of which help firms to improve their IC.
However, firms may use their IC to obtain a competitive advantages in the market by
implementing efficient governance frameworks and strategic resource management (Tran
et al., 2020; Widiatmoko et al., 2020).
In general, empirical evidence about the association between CG and IC is
inconsistent. For instance, Achim et al. (2023) examine the effect of CG on IC in firms
listed on the Bucharest Stock Exchange between 2016 and 2021. The study found a
positive significant association between CG and IC, which helps firms to create wealth.
Moreover, Buallay and Hamdan (2019) investigated the association between IC and CG
Saudi stock exchanges, they found the firms with better CG demonstrated more efficient
use of human and structural capital. Nevertheless, firms with lower levels of CG have
less effectiveness in their capital. Furthermore, Sadiq et al. (2020) discovered the
association between CG and IC in the firms on Pakistan and found a significant
association between CG and IC. On the other side, Tran et al. (2020) measured CG by
board size, board independence, board remuneration, CEO duality, and major shareholder
holdings; they investigated the issue in emerging markets such as Vietnam and found a
negative impact of CG on IC. Lari Dashtbayaz et al. (2020) examined the effect of board
features and audit committee characteristics on IC. Finding an adverse association
between the board’s independence, financial expertise, and audit committee size with IC.
However, Al-Sartawi (2018) found a weak and negative relationship between CG and IC
in 274 firms in Gulf Cooperation Council countries. In addition, Appuhami and Bhuyan
(2015) found insignificantly association between CG and IC in the context of Australian
service firms. In the current paper, the association between the CG components,
including board size, board tenure, board diversity, and board education and IC studied.

2.1.1 Board size and IC

A key component of CG is board size, which indicates the number of directories on the
firm board. According to the agency theory, a large board can be detrimental to good
186 R. Abdelhaq et al.

business functioning due to communication and coordination issues, as well as difficulty

supervising and controlling the management (Jensen, 1993). This inefficiency extends to
management decisions and IC efficiency, possibly leading to degraded firm value
(Dalwai and Mohammadi, 2020). However, resource dependency theory discussed that
the larger boards have more relations with external parties, resulting in increased access
to more resources (Pfeffer and Salancik, 1978). The empirical results give an inconsistent
view of the association between board size and IC. According to Kusi et al. (2018),
bigger boards frequently comprise individuals with various experience, professional
and educational backgrounds, and abilities that promote board proficiency. Thus,
strengthening managers’ monitoring and improving the firm’s capacity to get more
resources, such as IC (Catanzaro and Teyssier, 2021; Pratama and Innayah, 2021), which
results in increased financial performance. Furthermore, Ali and Oudat (2021) found that
increasing the board size has a negative impact on control, supervision, and judgements
on IC, they suggest the smaller board are easier to make decisions than big boards.
However, several studies found positive relationships between board size and IC
(Hesniati, 2021; Nadeem, 2020). On the other hand, Tran et al. (2020) and Ali and Oudat
(2021) found negative impacts of board size on IC. However, Appuhami and Bhuyan
(2015) found an insignificant relationship between board size and IC. In alignment with
these studies, the hypothesis is proposed:
H1 Board size has a significant association with IC efficiency.

2.1.2 CEO duality and IC

CEO duality is a critical component of CG, which indicates where the CEO stands as the
board’s chairperson, a situation known as CEO tenure, influencing decision-making
inside a firm (Finkelstein and D’aveni, 1994). According to Jensen (1993), CEO duality
may undermine the board of directors as the CEO obtains greater authority, possibly
affecting either the directors or other executives. Given the long-term relationships with
directors, the researcher believed that the CEO’s frequent position as chairperson might
still have an impact. Nassirzadeh et al. (2023) confirm the capital market’s sensitivity to
changes in firm management. Changes in position may be considered as a strategy to
match the firm with environmental changes, with leadership transitions possibly
indicating directors’ issues in performing tasks and boosting shareholder value.
According to Bendig et al. (2018), CEO traits have an impact on all IC components.
However, the changing landscape of CG systems may result in changes to the CEO’s
influence. The empirical results give an inconsistent view of the association between
board tuner and IC. For example, Appuhami and Bhuyan (2015) revealed significant
associations between CEO duality and IC. Also, Shahzad et al. (2023) revealed a
significant positive nexus between CEO duality with IC efficiency. On the other hand,
Aslam and Haron (2020) and Tran et al. (2020) showed negative associations between
CEO duality with IC efficacy. However, some studies found insignificant association
between CEO duality with IC as Martins et al. (2018). In alignment with these studies,
the hypothesis is proposed:
H2 CEO duality has a significant association with IC efficiency.
 Corporate governance and intellectual capital efficiency 187

2.1.3 Board gender diversity and IC

The concept of board gender diversity refers to the nationality, ethnic background, gender
and racial background (Zaid et al., 2020). Gender diversity is a key factor in shaping the
composition of a board of directors. The inclusion of women improves the quality of
decisions by introducing various perspectives, skills, values, and beliefs, as a whole, fair
distribution of roles between genders (male, female) holds a large importance for any
society (Chyu et al., 2021; Fernando et al., 2020). According to Ardito et al. (2021),
women on boards may have a better understanding of client behaviour, needs, and
potential for businesses to address those requirements. The upper-echelon theory suggests
that gender diversity increases innovation by effective approaches and innovative
decisions (Saeed et al., 2022), which lead to greater accumulation, and influence
innovation in the structure of the capital. Thus, gender diversity retains qualities
embodied in flexibility, adoption of innovation and information processing which aid
businesses in developing plans on how companies include innovation in their goods or
services (Javeed et al., 2022). Empirical evidence provided by Faccio et al. (2016)
suggested that companies that have women CEOs are slower to make investment
decisions which are reflected in a smaller amount of volatile earnings. A study by
Nadeem et al. (2019) showed a strong positive relationship between the number of
females on boards and IC. However, Aslam and Haron (2020) study reveals that gender
diversity has a negative influence on IC in Islamic banks. On other hand, Yahaya and
Tijani (2020) found that female directors do not influence IC, this result was supported
by Ali et al. (2021) found that gender diversity is not a major factor affecting IC. In
alignment with these studies, the hypothesis is proposed:
H3 Board gender diversity has a significant association with IC efficiency.

2.1.4 Board education and IC

Education is related to a person’s educational qualifications and academic professions
and is of countless importance in the labour market (Sidki et al., 2023). The academic
qualifications and experiences of the board’s members are important in terms of their
awareness and perspective to innovate ideas and activities, which assists them in
determining and assessing new opportunities, investments, and technologies to achieve
high performance and therefore reach the companies’ goals. Researchers found that
CEOs control their corporations with a moderately personalised viewpoint based on their
past experiences, motivations, and personal features, even when making decisions in an
extremely competitive environment with limited corporate resources (Hambrick, 2007).
Human capital theory points out the indications of training and education as an
investment of capital; the development of knowledge, competence, and ongoing learning.
However, Psacharopoulos and Woodhall (1985) approved that fast development in Asian
countries comes as a result of high investment in the development of human capital. This
perspective has been confirmed by the noticeable growth in social and economic
environments observed, a part of the advantages of some oil-dependent nations have to
offer. Furthermore, the theory primarily challenges the idea that firms strive to limit their
expenditures on training and development, rather, it supports the idea that these indicators
should be viewed as cost-effective activities, so this theory focuses on factors related to
the CG in addition to the HR management factors of an entity (Oyewunmi et al., 2017). A
study by Lajili et al. (2020) found a significant impact of CG on human resource
188 R. Abdelhaq et al.

performance. Moreover, Oktaviana and Setiawan (2022) found that educational diversity
of board members has a negative impact on IC. But, Al-Juaidi (2020) supported that the
educational diversity of board members has a positive influence on IC. In alignment with
these studies, the hypothesis is proposed:
H4 Board education has a significant association with IC efficiency.

3 Research methodology

This study aims to determine the association between CG and IC. This study contains
four hypotheses, namely the effect CG consisting of the board size, CEO duality, gender
diversity, and board education, where IC consists of several variables, namely: human
capital coefficient (HCE) for the firm, capital employed coefficient (CEE) for the firm,
structured capital coefficient (SCE) for the firm and value-added intellectual capital
(VAIC).

3.1 Study sample and data collection

This research examines the performance of companies listed on the PEX between 2013
and 2022. The study utilises a panel data approach and focuses on companies that were
actively listed on the PEX during this period and had comprehensive and available data.
Some companies either did not disclose their information years or were delisted from the
stock exchange, so they were excluded from the sample. Companies with incomplete
reports and outliers were also removed based on the exclusion criteria. The final sample
consists of 43 companies, resulting in 430 firm-year observations. Data for the study
were obtained from the publicly accessible annual reports of the selected companies,
which were sourced from the PEX website. The statistical analysis, including the
examination of associations between variables, was conducted using the STATA
software programme. Appendix provides a concise summary of the study sample.

3.2 Variables measurements and proxies

3.2.1 Dependent variables
This study utilised the VAIC, a coefficient model developed by Pulic (1998). The VAIC
is widely used by researchers to evaluate IC (Ali and Oudat, 2021; Nour and Momani,
2021). The justification for employing this model is its ability to measure the contribution
of both (physical and financial) and intellectual resources (human, employed and
structural) in generating value-added (VA) by the firm. The algebraic formula for VAIC
comprises the sum of the efficiency value of working capital creation (physical and
financial) and the three primary components of VAIC, namely human, structural and
employee capital (Al-Juaidi, 2020).
VAIC = HCE + SCE + CEE
 Corporate governance and intellectual capital efficiency 189

The formula for computing VA for the firm is VA = OP + EC + DE + AE. VA represents

the sum of: operating profit (OP), employee cost (EC), depreciation expenses (DP) and
amortisation expenses (AE) (Nour and Momani, 2021).
VA = OP + EC + DE + AE
HC is the primary and essential component of VAIC. Various classifications of VAIC
have been proposed, but they all highlight HC as the central component (Nassirzadeh
et al., 2023). However, Konno and Schillaci (2021) clarify HC, it refers to the
amalgamation of competence, knowledge, skills, innovation, attitude, commitment,
wisdom and experience. It encompasses the employee’s competence, skills, experience
and intellectual capability. Researchers such as Shahriari et al. (2022) assert that HC is a
crucial resource for organisations aiming to gain a competitive edge in the ever-changing
and unpredictable business landscape of today. HC encompasses the explicit and implicit
knowledge, competencies, and capabilities of employees, which together form a
framework of knowledge and skills required for specific tasks.
HCE = VA / HC ; human capital

Structured capital (SC) refers to the assets and resources that result from the previous
performance of human capital, such as regulation, licenses, patents, reputation, standards
and customer relationships (Bhattacharjee and Akter, 2022). It encompasses processes,
systems, intellectual property, and other intangible assets that a company possesses. This
capital is closely tied to the mechanisms and structure of the firm and supports
optimal intellectual performance among employees, ultimately leading to improved
organisational performance. In essence, structural capital encompasses anything within
an organisation that facilitates the implementation of HC. Unlike HC and SC remains
with the organisation even after employees depart. It includes databases, organisational
charts, strategies, process guidelines, and other valuable resources for the company
(Nassirzadeh et al., 2023).
SCE = VA / SC ; SC = VA − HC ; structured capital

CE refers to the ability to establish strong relationships with stakeholders, including

customers, suppliers, investors, government, and society as a whole. It encompasses both
the current value of the organisation and the potential future value of its relationships.
This includes assets like trademarks, market share, customer information and customer
relations (Nassirzadeh et al., 2023). Numerous studies on VAIC have also considered this
classification. The interrelationship between these components demonstrates that they are
all grounded in (IC).
CEE = VA / CE ; VA capital employed .

3.2.2 Independent and control variables

This study consists of four independent variables namely, board size, board tenure, board
gender diversity and board education. In addition, this study has two control variables,
firm size and firm profitability. Table 1 represents the measurements of the variables for
dependent, independent and control variables.
190 R. Abdelhaq et al.

Table 1 Variables measurements

Variable Measurement Abbreviations Studies

Dependent variable
Intellectual Measured by VAIC equations, Nour and Momani
capital efficiency where VAIC = CEE + HCE (2021)
+ SCE
Human capital VA / HC; human capital HCE Al Momani et al.
coefficient for firm (2021c), Nassirzadeh
et al. (2023)
Capital employed VA / CE; VA capital employed CEE Nadeem et al. (2019),
coefficient for firm Ahmad Sharabati
et al. (2016)
Structured capital VA / SC; structured capital for the SCE Ali and Oudat (2021)
firm.
Dependent variables (CG indicators)
Board size Number of directors in the board BSIZE Elfeky (2017),
Mardawi et al.
(2024)
CEO duality If CEO and chairman roles are CEODUL Freitas Cardoso et al.
separated then 1, otherwise (0) (2019), Yasser and
Al Mamun (2016)
Board gender The number of females divided BGIVE Nadeem (2020),
by board size Nour et al. (2023)
Education The number of directories who BEDU Guney et al. (2020)
have MA or PhD divided by
board size
Control variables (firms features)
Firm size Natural logarithm of total asset FSIZE Al-Sartawi (2015),
Basalat et al. (2023)
Profitability Net profit divided by total asset PROFIT Jalal et al. (2023),
Nour et al. (2022b)

3.3 Empirical models

To investigate the association between CG and IC, a multiple regression econometric
equation formulated:
VAICit = α + β1 BSIZEit + β 2 CEODULit + β 3 BGIVEit + β 4 BEDU it + β5 FSIZEit
+ β 6 PROFITit + ε

The following models were derived from the first model, explaining the elements of
VAIC separately; the first sub-model is Model (I):
CEEit = α + β1 BSIZEit + β 2 CEODULit + β3 BGIVEit + β 4 BEDU it + β 5 FSIZEit
+ β 6 PROFITit + ε

The second sub-model is Model (II):

 Corporate governance and intellectual capital efficiency 191

HCEit = α + β1 BSIZEit + β 2 CEODULit + β3 BGIVEit + β 4 BEDU it + β5 FSIZEit

+ β 6 PROFITit + ε

The third sub-model is Model (III)

SCEit = α + β1 BSIZEit + β 2 CEODULit + β 3 BGIVEit + β 4 BEDU it + β5 FSIZEit
+ β 6 PROFITit + ε

where α is the intercept, β1 to β6 the regression coefficients, i is the firm, t represents the
year and ε is the error term.

4 Empirical results

This part contains a discussion of the most important results, such as the descriptive
analysis and normality, heteroskedasticity, correlation matrix, multicollinearity and
robust test results.

4.1 Descriptive statistics

For descriptive statistics, Table 2 presents the descriptive results of dependent,
independent and control variables.
Table 2 Descriptive statistics

Variable Ob. Mean Std. dev. Min. Max.

VAIC 430 5.53 4.05 –6.88 23.1
CEE 430 0.33 0.58 –0.27 6.73
HCE 430 4.35 3.77 –8 19.6
SCE 430 0.89 1.32 –3.69 22.3
Board size 430 8.72 2.2 4 15
CEO duality 430 0.21 0.41 0 1
Gender 430 0.07 0.11 0 0.57
Education 430 0.11 0.14 0 0.6
Profitability 430 0.04 0.1 –0.63 0.73
Firm size 430 17.83 1.83 13.54 22.6
Source: The authors
According to Table 2, the mean of VAIC is 5.53 with a minimum value of –6.88 and
maximum value of 23.12. Furthermore, the board size of Palestinian-listed companies is
approximately nine persons in the board, with a minimum value of 4 and a maximum of
15. This violates the code of CG in Palestine, which indicates that board size should not
exceed 11 persons. In addition; there is a duality between the chairman of the board of
directors and the CEO in Palestinian companies in 20.7% of companies. Moreover, there
is little representation of women on the boards of Palestinian companies, which is about
6.9%. In addition, the percentage of board members who have a master’s or PhD degree
is nearly 10.1%.
192 R. Abdelhaq et al.

4.2 Normality, heteroskedasticity, correlation matrix and multicollinearity

When utilising OLS regression, there are several crucial factors to take into account,
normality being one of the most crucial. According to normality, for the data to meet
statistical assumptions, their distribution should be roughly normal. Furthermore,
heteroscedasticity – defined as the existence of unequal variances in the errors – is a
critical component of testing since it might impact the correctness of the findings
(Daryanto, 2020). When the residuals were tested for normality using the Shapiro-Wilk
W test, the results indicated that the p-value of 0.048 was statistically significant at the
0.05 level. Therefore, it makes sense to believe that the residuals do not have a normal
distribution. Furthermore, heteroscedasticity was detected and constant variance in the
model was verified using the Breusch-Pagan/Cook-Weisberg test. The results indicate
that, at the 0.05 level, the p-value of 0.040 was statistically significant. Thus, the issue of
heteroskedasticity arose. To eliminate the issues of heteroskedasticity and normality,
robust regression was employed to evaluate the results and to test the hypothesis.
Table 3 Person correlation matrix

Variables 1 2 3 4 5 6 7
1 VAIC 1
2 Board size –0.025 1
3 CEO duality –0.052 –0.102 1
4 Board gender 0.066 –0.163 0.059 1
5 Education 0.119 0.217 –0.127 0.021 1
6 Profitability 0.082 –0.012 –0.069 0.071 0.047 1
7 Firm size –0.016 0.532 0.002 –0.103 0.059 –0.005 1

Table 4 Variance inflation factor tests

Variables VIF 1 / VIF

Board size 1.507 0.664
Firm size 1.407 0.711
Board education 1.072 0.933
Board gender 1.039 0.962
CEO duality 1.034 0.967
Profitability 1.012 0.988
Mean VIF 1.179 .

When utilising OLS regression to assess the link between the independent and dependent
variables, correlation is yet another crucial factor to take into account. The degree of
relationship between two variables is called correlation. To make sure that
multicollinearity is not an issue, it is crucial to test for correlation between the
independent, control and dependent variables as well as between the independent
variables themselves. To ensure that there is no multicollinearity, we conducted the
 Corporate governance and intellectual capital efficiency 193

person correlation matrix in Table 3 and variance inflation factor tests in Table 4. The
results from the correlation matrix indicate that the correlations between variables are
predominantly low, with none exceeding 0.80. The highest observed correlation is 0.53,
occurring between board size and firm size. This finding is essential for confirming the
absence of multicollinearity.
The result of variance inflation factor test was used, and the VIF for all variables less
than 10. So that, no multicollinearity occurred (Sulaiman et al., 2021; Wondola et al.,
2020).

4.3 Regression results

Robust regression was used in the study to test the hypothesis and to detect any problems
with heteroskedasticity and normality (Lima et al., 2010). However, the relationship
between CG and VAIC is seen in Table 5 regression analysis. Main model displays the
dependent variable VAIC, while Models (I), (II) and (III) display the dependent variables
CEE, HCE and SCE, respectively.
Robust regression result indicates that board size has an insignificant association with
VAIC, CEE, HCE, and SCE. Thus, the first hypothesis is rejected. This result is in line
with Appuhami and Bhuyan (2015). According to the regression results, CEO duality
has an insignificant association with VAIC, CEE, HCE and SCE. Thus, the second
hypothesis is rejected. This result is consistent with (Martins et al., 2018).
Board gender diversity has a positive significant association with VAIC at
p-value = 0.1, and a positive significant association with HCE at p-value = 0.05, these
results are consistent with previous research conducted by Nadeem et al. (2019).
However, gender diversity has a significant negative association with SCE at
p-value = 0.1. This result is in line with previous research (Aslam and Haron, 2020). In
addition to that, there is no association between board gender diversity and CEE. So, the
third hypothesis is accepted at p-value = 0.1. The positive association with VAIC
explained by Kang et al. (2007) that women on boards might have a better grasp of
customer behaviour, needs, and how businesses can meet those needs. In addition,
according to Tejedo-Romero et al. (2017), these phenomena indicate that women’s
involvement in organisational structure is crucial because they have a greater
understanding of stakeholders like employees and the surrounding environment.
According to Table 5, the board education has a highly positive significant
association with VAIC, CEE, HCE and SCE. This result is consistent with previous
research (Al-Juaidi, 2020; Lajili et al., 2020). It implies that the board members’ varied
educational experiences reflect the differences in their expertise and experience levels.
This diversity affects the board’s ability to come up with original solutions for
challenging issues. Moreover, it adds to a wider range of perspectives, improving the
development and assessment of strategies. This result is in line with the human capital
theory that highlights how education and training contribute to the growth of knowledge,
competence, and continuous development, just like any other capital investment.
According to Al-Juaidi (2020), diversity in education is viewed as a chance for
businesses to innovate in many ways like IC. Thus, the fourth hypothesis is accepted.
Accordingly, the research results are summarised in Table 6.
 194

Table 5

Main model Model (I) Model (II) Model (III)

R. Abdelhaq et al.

Variables VAIC CEE HCE SCE

Coefficient t-statics Coefficient t-statics Coefficient t-statics Coefficient t-statics
Robust regression results

Board size 0.07 0.31 –0.01 –0.32 0.05 0.21 0.03 1.03
CEO duality –1.84 –1.45 0.064 0.59 –1.90 –1.55 –0.01 –0.06
Board gender 6.79* 1.72 –0.17 –0.59 7.65** 1.98 –0.69* –1.74
Board education 11.11*** 3.4 0.36** 1.97 9.66*** 3.03 1.10** 2.38
Profitability 9.28 1.63 0.96** 2 10.22* 1.81 –1.90 –1.4
Firm size –0.04 –0.23 0.066*** 3.27 –0.04 –0.22 –0.07 –1.13
Constant 7.51** 2.02 –0.80*** –2.59 6.18* 1.76 2.12* 1.92
Observations 430 430 430 430
R-squared 0.031 0.059 0.031 0.043
Note: Robust standard errors in parentheses; ***p < 0.01, **p < 0.05 and *p < 0.1.
 Corporate governance and intellectual capital efficiency 195

Table 6 Results summary

Hypotheses Result
H1 Board size has a significant association with intellectual capital efficiency. Rejected
H2 CEO duality has a significant association with intellectual capital efficiency. Rejected
H3 Board gender diversity has a significant association with intellectual capital Partially
efficiency. accepted
H4 Board education has a significant association with intellectual capital Accepted
efficiency.

5 Conclusions and recommendation

This study contributes to the literature by investigating the association between CG and
IC by Palestinian firms during 2013–2022. The study hypotheses aimed to examine the
association between CG variables (board size, CEO duality, board gender diversity and
board education) and IC efficiency. Robust regression was used in the study to test the
hypothesis and to detect any problems with heteroskedasticity and normality. The study’s
result provides that board gender diversity and board education have a significant
association with IC and their components (CEE, HCE and SCE), while board size and
CEO duality have an insignificant association with IC and their components (CEE, HCE
and SCE). This emphasises the importance of board education and gender diversity in the
evaluation of the IC.
The study practical implications include recommendation for policymakers,
regulators, and managers of firms appoint more directors with high educational levels
(master’s and PhD) to their boards to increase the performance of IC in their firms.
Moreover, the results show the need to increase women’s representation on the board of
directors of Palestinian firms. Finally, the research results help the PCMA in supporting
the implementation of the five-year financial technology strategy, as this study provides
empirical evidence to support this initiative at the appropriate time. The study has some
limitations, Firstly, there is no specific measurement to measure the IC around the world,
so that, we cannot compare our results with companies that use different measurements.
Secondly, there is no specific index to measure the CG or the variables that represent the
CG. Thirdly, the sample size is small due to the small size of the Palestinian market. In
addition to that, future studies should examine more variables and study the association
with IC such as board experts, director age, and director independence characteristics. In
addition, conducting the study in a different environment and for a longer period.

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Appendix

Table 7 Study sample

Number Companies Symbols Sector

1 Birzeit Pharmaceuticals BPC Industrial
2 The Vegetable Oil Industries VOIC Industrial
3 Jerusalem Pharmaceuticals JPH Industrial
4 Palestine Poultry AZIZA Industrial
5 Jerusalem Cigarette JCC Industrial
6 National Aluminum And Profiles NAPCO Industrial
7 Golden Wheat Mills GMC Industrial
8 Arab Company For Paints Products APC Industrial
9 The National Carton Industry NCI Industrial
10 Palestine Plastics Industries LADAEN Industrial
11 Beit Jala Pharmaceutical BJP Industrial
12 Palestine Telecommunications PALTEL Service
13 Wataniya Palestine Mobile Telecommunications OOREDOO Service
14 Palestine Electric PEC Service
15 Al Wataniayh Towers ABRAJ Service
16 Ramallah Summer Resorts RSR Service
17 The Arab Hotels AHC Service
18 Palestinian For Distribution & Logistics Services WASSEL Service
19 Nablus Surgical Center NSC Service
20 PALAQAR For Real Estate Development PALAQAR Service
21 Palestine Development & Investment PADICO Investment
22 Palestine Industrial Investment PIIC Investment
23 Arab Palestinian Investment APIC Investment
24 Palestine Real Estate Investment PRICO Investment
25 Union Construction and Investment UCI Investment
26 Palestine Investment & Development PID Investment
27 Arab Investors ARAB Investment
28 Al-Aqariya Trading Investment AQARIYA Investment
29 Jerusalem Real Estate Investment JREI Investment
30 Bank of Palestine BOP Bank
31 Palestine Islamic Bank ISBK Bank
32 Arab Islamic Bank AIB Bank
33 The National Bank TNB Bank
34 Al Quds Bank QUDS Bank
35 Palestine Investment Bank PIBC Bank
36 Palestine Securities Exchange PSE Bank
 Corporate governance and intellectual capital efficiency 203

Appendix

Table 7 Study sample (continued)

Number Companies Symbols Sector

37 National Insurance NIC Insurance
38 Trust International Insurance TRUST Insurance
39 Global United Insurance GUI Insurance
40 Palestine Insurance PICO Insurance
41 Al-Takaful Palestinian Insurance TIC Insurance
42 Al Mashriq Insurance MIC Insurance
43 Ahliea Insurance Group AIG Insurance