How Human Capital Investments Drive Bank Performance: The Mediating Effect of Employee Motivation in Nepalese Commercial Banks
How Human Capital Investments Drive Bank Performance: The Mediating Effect of Employee Motivation in Nepalese Commercial Banks

Summary/Abstract: Purpose – Most studies in developing countries treat human capital (HC) as part of intellectual capital and rely on secondary data. Empirical evidence on the human capital investment (HCI) –bank performance (BP) relationship is limited, especially regarding key HC dimensions. Although HCI can enhance performance, its impact depends on employee motivation, which is often overlooked as a mediating factor, limiting theoretical understanding of how value is created.Aims(s) – Grounded on RBV and its extension, this study examines the four aspects of human capital investment (i.e., training, skills, education level, and knowledge level of employees) that influence the performance of Nepalese commercial banks through the mediating role of intrinsic motivation.Design/methodology/approach – A proportionate purposive sampling technique was used to collect data from all 20 commercial banks. Data was collected using a survey questionnaire from 417 non-managerial employees and analyzed through SMART-PLS 4.0.Findings – The findings revealed that HCI significantly impacted BP, with training, knowledge, and skills significantly connecting with BP. Training emerged as a significant predictor, while education had no significant impact. HCI exerted a significant impact on IM, and IM partially mediated the HCI-BP relationship.Limitations of the study – This study is limited by its cross-sectional survey design and focus on a single-country banking context, and reliance on only four dimensions of HCI.Practical implications – Conclusively, the findings emphasize that high-performing banks are built by developing practical skills, job-relevant knowledge, structured training, and motivation, but not merely relying on degrees. The study makes an interdisciplinary contribution by bridging insights from psychology, HRM, and banking operations, and enforces a paradigm shift in HR and policy practices to prioritize competence-based development and a motivation-enhancing system for sustaining performance outcomes and competitive advantage.Originality/value – This study advances a process-based perspective on explaining how HCI enhances performance by linking organizational investment with individual behavior.

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