Asian Journal of Finance & Accounting ISSN 1946-052X 2014, Vol. 6, No. 2 www.macrothink.org/ajfa 103 Intellectual Capital Performance of Indonesian Banking Sector: A Modified VAIC (M-VAIC) Perspective Ihyaul Ulum (Corresponding author) University of Muhammadiyah Malang, Indonesia E-mail: mas_ulum@yahoo.com Imam Ghozali Professor in Accounting, Diponegoro University, Indonesia Agus Purwanto Accounting Department, Diponegoro University, Indonesia Received: April 20, 2014 Accepted: Sep. 21, 2014 Published: December 1, 2014 doi:10.5296/ajfa.v6i2.5246 URL: http://dx.doi.org/10.5296/ajfa.v6i2.5246 Abstract The paper seeks to estimate and analize the Modified VAIC (M-VAIC) for measuring the value-based performance of the Indonesian banking sector for year of 2009-2012. M-VAIC is a comprehensive model to measure Intellectual Capital Performance (ICP) based on Value Added Intellectual Coefficient (VAIC™). The findings of this study indicate that the value of M–VAIC of Indonesian banking sector has a rather long range, which is between -21.41 until 5.20. Based on M-VAIC scores, performance of IC is classified into four, namely Top Performers, Good Performers, Performers Common, and Bad Performers. The results show that the ranking of three of the four state banks are on the Top Performers category. M-VAIC can be used to measure the ICP all of industries, not only banks. This is also reinforced by the results of the regression that indicate that the value added (VA) is a function of capital employed and the IC. Keywords: Intellectual Capital Performance (ICP), M-VAIC, VAIC, Indonesian banking sector