Journal of Commerce and Accounting Research

Open Access Open Access  Restricted Access Subscription Access
Open Access Open Access Open Access  Restricted Access Restricted Access Subscription Access

Determinants of Intellectual Capital Disclosure Practices of Indian Companies


Affiliations
1 Kalna College, Burdwan,West Bengal, India
2 Department of Commerce,The University of Burdwan, Burdwan, West Bengal, India
     

   Subscribe/Renew Journal


Numerous academicians, business professionals, and consultants identified 'intellectual assets/capital' as the main factor of value creation in the present knowledge economy. Companies especially in the service sectors require maximum amount of this type of capital to maintain their existence in the competitive market, whereas empirical results show that companies disclose lesser amount of intellectual capital related information in the annual reports. In this study, we examine the factors that determine the proportion of intellectual capital disclosure in the annual reports. For the purpose of the study 30 Indian knowledge-intensive companies (software, pharmaceuticals, and finance) are selected (on the basis of highest market capitalisation) for the period 2009-2012. Content analysis of annual reports is done to prepare intellectual capital disclosure (ICD) index and efficiency of intellectual capital is measured through VAIC. Multiple regression analysis is applied to examine the relationship between dependent and independent variables. Empirical results show that audit committee's size, age, and firm size have positive relation with intellectual capital disclosure but VAIC, profitability, and leverage have negative relationship with intellectual capital disclosure. This negative association between intellectual capital efficiency and disclosure suggests that intellectually efficient companies disclose less information in the financial statement for fear of losing competitive advantage.

The present study is the first study in the Indian context that examines the determinant(s) of intellectual capital disclosure. However, this study is confined to 30 Indian knowledge companies for the period 2009-2012.


Keywords

IC Disclosure, Content Analysis, Indian Knowledge Companies, IC Efficiency.
Subscription Login to verify subscription
User
Notifications
Font Size


  • Arvidsson, S. (2003).The extent of disclosure on intangibles in annual reports, paper presented at 4th Annual SNEE Congress, Molle, 20-23 May.

  • April, K. A., Bosma, P., & Deglon, D. A. (2003). IC mea surement and reporting: establishing a practice in SA mining. Journal of Intellectual Capital, 4(2), 165-180.

  • Al-Ali, N. (2003). Comprehensive intellectual capital management: Step-by-step. John Wiley & Sons, USA.

  • Alam, I., & Deb, S. K. (2010). Human resource accounting disclosure (HRAD) in Bangladesh: multifactor regression analysis - a decisive tool of quality assessment. The Cost and Management, 9-13.

  • Beaulieu, P. R., Williams, S. M., & Wright, M. E. (2002). Intellectual capital disclosures in Swedish annual reports, in Bontis, N. (Ed.), World Congress on Intellectual Capital Reading, Butterworth-Heinemann, Boston, MA, pp. 135-56.

  • Brammer, S. J., & Pavelin, S. (2006). Voluntary environmental disclosures by large UK companies. Journal of Business Finance & Accounting, 33 (7-8), 1168-88.

  • Brennan, N. (2001). Reporting intellectual capital in annual reports: evidence from Ireland.Accounting, Auditing & Accountability Journal, 14(4), 423-436.

  • Bukh, P. N., Nielsen, C., Gormsen, P., & Mouritsen, J. (2005). Disclosure of information on intellectual capital in Danish IPO prospectuses. Accounting, Auditing & Accountability Journal, 18(6), 713-32.

  • Bhasin, M. L. (n.d.) Intellectual Capital Reporting Study of IT-Sector Corporations in India. Australian Journal of Business and Management Research, 1(1).16-28.

  • Brennan, N. (2001). Reporting intellectual capital in annual reports: evidence from Ireland. Accounting, Auditing & Accountability Journal, 14(4), 423-36.

  • Bontis, N. (2003). Intellectual capital disclosures in Canadian corporations. Journal of Human Resource Costing and Accounting, 7(1/2), 9-20.

  • Botosan, C. A. (1997). Disclosure level and the cost of equity capital. The Accounting Review, 72(3), 323-49.

  • Bozzolan, S., Favotto, F., & Ricceri, F. (2003). Italian annual intellectual capital disclosure: An empirical analysis. Journal of Intellectual Capital, 4(4), 543-558.

  • Clarkson, M. B. E. (1995). A stakeholder framework for analyzing and evaluating corporate social performance. The Academy of Management Review, 20(1), 92-117.

  • Chander, S., & Mehra, V. (2011). A study on intangible assets disclosure: An evidence from Indian companies. Intangible Capital, 7(1), 1-30.

  • Chan, K. H. (2009). Impact of intellectual capital on organizational performance.An empirical study of companies in the Hang Seng Index (Part 2), The Learning Organization,16(1), 22-39.

  • Cheng, M., Lin, J., Hsiao, T., & Thomas W. L, (2010). Invested resource, competitive intellectual capital, and corporate performance. Journal of Intellectual Capital, 11(4),433 - 450.

  • Chen, M.C., Cheng, S. J., & Hwang, Y. (2005). An empirical investigation of the relationship between intellectual capital and firms' market value and financial performance. Journal of Intellectual Capital, 6(2), 159-176.

  • Chow, C. W., & Wong-Boren, A. (1987). Voluntary financial disclosure by Mexican corporations. Accounting Review, 62(3), 533-541.

  • Cormier, D., Magnan, M., & Van Velthoven, B. (2005). Environmental disclosure quality in large German companies: economic incentives, public pressures, or institutional conditions? European Accounting Review, 14 (1), 3-39.

  • Deegan, C. (2000). Financial accounting theory, McGraw-Hill, Sydney.

  • Edvinsson, L., & Malone, M. S. (1997). Intellectual capital: The proven way to establish your company's real value by measuring its hidden brainpower. London: Judy Piatkus.

  • Goh, P. C., & Lim, K. P. (2004).Disclosing intellectual capital in company annual reports: evidence from Malaysia. Journal of Intellectual Capital, 5(3), 500-10.

  • Ghosh, S. K., & Nandi, S. (2012). Corporate Disclosure and Audit Committee Characteristics in India, 4th Conference on Excellence in Research and Education, IIM Idore, Indore.

  • Ghosh, S. K., & Mondal, A. (2009). Indian software and pharmaceutical sector IC and financial performance. Journal of Intellectual Capital, 10(3), 369-388

  • Gour, A. S., & Gour, S. S. (2009). Statistical Methods for Practice and Research, (2nd Ed.) Response Books.

  • Gujarati, D. N. (2004). Basic Econometrics, (4th Ed.). New Delhi, Tata McGraw-Hill Publishing Company Limited.

  • Guthrie, J., Petty, R., Ferrier, F., & Wells, R. (1999).There is no accounting for intellectual capital in Australia: a review of annual reporting practices and internal measurement of intangibles, paper presented at the OECD Symposium on Measuring and Reporting of Intellectual Capital, Amsterdam.

  • Guthrie, J., & Petty, R. (2000). Intellectual capital: Australian annual reporting practices. Journal of Intellectual Capital, 1(3), 241-51.

  • Guthrie, J., Petty, R., Yongvanich, K., & Ricceri, F. (2004). Using content analysis as a research method to inquire into intellectual capital reporting. Journal of Intellectual Capital, 5(2), 282-93.

  • Guthrie, J., Petty, R., & Ricceri, F. (2006). The voluntary reporting of intellectual capital: comparing evidence from Hong Kong and Australia. Journal of Intellectual Capital, 7(2), 254-272.

  • Garcia-Meca, E., & Martinez, I. (2005). Assessing the quality of disclosure on intangibles in the Spanish capital market. European Business Review, 17(4), 305-313.

  • Hossain, M., & Hammami, H. (2009). Voluntary disclosures in the annual reports of an emerging country: the case of Qatar. Advances in Accounting, Incorporating Advances in International Accounting, 25(2), 255-65.

  • Hitt, M. A., Bierman, L., Shimizu, K., & Kochhar, R. (2001). Direct and moderating effects of human capital on strategy and performance in professional service firms: A resource based perspective. Academy of Management Journal, 44(1), 13-28.

  • Hong P. T., David P., & Phil, H., (2008).The evolving research on intellectual capital. Journal of Intellectual Capital, 9(4), 585 - 608.

  • Jensen, M.C.,& Meckling, W.H. (1976).Theory of the firm: managerial behavior, agency costs and ownership structure. Journal of Financial Economics,3(4), 305-60.

  • Mavridis, D. (2004). The intellectual capital performance of the Japanese banking sector.Journal of intellectual Capital, 5(1), 92-115.

  • Paula, K., & Antti, L. (2007). Investigating the value and efficiency of intellectual capital. Journal of Intellectual Capital, 8 (2), 272 - 287

  • Ismail, T. H. (2008). Intellectual Capital Reporting in Knowledge Economy: Evidence from Egypt paper presented at the International Conference on "Economic Direction III: Economic Policy in a Rapidly Changing World", at Kuwait University.

  • Jindal, S., & Kumar, M. (2012).The determinants of HC disclosures of Indian firms.Journal of Intellectual Capital, 13(2), 221 - 247

  • Komnenic, B., & Pokrajcic, D. (2012). Intellectual Capital and Corporate Performance of MNCs in Serbia. Journal of Intellectual Capital, 13(1), 106-119.

  • Kim, M., & Ritter, J. R. (1999). Valuing IPOs. Journal of Financial Economics, 53(3),409-37.

  • Lim, L., & Dallimore, P. (2002).To the public listed companies, from the investment community. Journal of Intellectual Capital,3(3), 262-76.

  • Lang, M., & Lundholm, L. (1993). Cross-sectional determinants of analysts’ ratings of corporate disclosures.Journal of Accounting Research, 37 (2), 353-83.

  • Cordazzo, M., & Vergauwen, P. G. M. C. (2012). Intellectual capital disclosure in the UK biotechnology IPO prospectuses. Journal of Human Resource Costing & Accounting, 16 (1), 4-19

  • Nurunnabi, M., Hossain, M., & Hossain, M. (2011). Intellectual capital reporting in a South Asian country: evidence from Bangladesh. Journal of Human Resource Costing & Accounting, 15(3), 196-233

  • Mondal, A., & Ghosh, S. K. (2012). Intellectual capital and financial performance of Indian Banks. Journal of Intellectual Capital, 13(4).

  • Mondal, A., & Ghosh, S. K. (Forthcoming). Intellectual capital reporting trends in India: An Empirical study on selected companies. International Journal of Financial Management.

  • Myers, R. (1990). Classical and modern regression with applications, (2nd ed.). Duxbury, Boston, MA.

  • Niemark, M. (1995). The hidden dimensions of annual reports: Sixty years of social conflict at general motors, Markus Wiener, Princeton, NJ.

  • Oliveras, E., Gowthorpe, C., Kasperskaya, Y., & Perramon, J. (2008). Reporting intellectual capital in Spain.Corporate Communications, 13(2), 168-181.

  • Oliveira, L., Rodrigues, L. L., & Craig, R. (2006). Firmspecific determinants of intangibles reporting: evidence from the Portuguese stock market. Journal of Human Resource Costing & Accounting, 10 (1), 11-33.

  • Omar, I. H. J. (2008).Voluntary intellectual capital disclosure: evidence from Bahrain, working paper, University of Bahrain, Bahrain.

  • Ousama, A. A., Fatima, A. H., & Majdi, A. R. H. (2012). Determinants of intellectual capital reporting: Evidence from annual reports of Malaysian listed companies. Journal of Accounting in Emerging Economies, 2 (2), 119 - 139

  • Pulic, A. (2000).VAICTM- An accounting tool for IC management. International Journal of Technology Management, 20(5, 6, 7, 8),702-714

  • Pablos, P. (2003). Intellectual capital reporting in Spain: a comparative view. Journal of Intellectual Capital, 4(1), 61-81

  • Riahi-Belkaoui, A. (2003). Intellectual capital and firm performance of US multinational firms: a study of the resource- based and stakeholder view. Journal of Intellectual Capital, 4(2), 215-226.

  • Roberts, C., Weetman, P., & Gordon, P. (2005). International financial reporting: A comparative approach. Essex: Pearson Education

  • Singh, I., & Van Der Zahn, J. L. W. (2008). Determinants of intellectual capital disclosure in prospectuses of initial public offerings. Accounting & Business Research, 38 (5), 409-31.

  • Stewart. T. A. (1997). Intellectual capital The new wealth of organizations.New York, Doubleday Dell Publishing Group.

  • Scott, W. R. (2000). Financial Accounting Theory, 2nd edition, Prentice Hall.

  • Sujan, A., & Abeysekera, I. (2007). Intellectual capital reporting practices of the top Australian firms. Australian Accounting Review, 17(2), 62-74.

  • Singh, S., & Kansal, M. (2011). Voluntary disclosures of intellectual capital: An empirical analysis. Journal of Intellectual Capital, 12(2), 301 - 318

  • Sveiby, K. E. (1997). The new organizational wealth: managing and measuring knowledge based assets. Berrett Koehler Publisher, San Francisco, CA.

  • Singhvi, S. S., & Desai, H. B. (1971). An empirical analysis of quality of corporate financial disclosure. The Accounting Review,129-38.

  • Najibullah, S. (2005). An empirical investigation of the relationship between intellectual capital and firms’ market value and financial performance in context of commercial banks of Bangladesh. Retrieved from http://sb.iub.edu.bd/ internship/autumn2005/0220175.pdf

  • Teece, D. J. (2000). Managing intellectual capital: Organizational, Strategic, and Policy Dimensions. Oxford University Press, Oxford.

  • Thompson, P., & Randall, B. (2000). Accounting for intellectual capital: shaping the future through the knowledge economy. Singapore Accountant, 32-39.

  • Vafaei, A., Taylor, D., & Ahmed, K. (2011). The value relevance of intellectual capital disclosures. Journal of Intellectual Capital, 12(3), 407 - 429

  • Weisberg, S. (1985). Applied Linear Regression, 2nd ed., Wiley, New York, NY.

  • Watts, R.,& Zimmerman, J. (1986). Positive Accounting Theory, Prentice Hall, Englewood Cliffs, NJ.

  • Wallace, R. S. O., & Naser, K. (1995). Firm specific determinants of the comprehensiveness of mandatory disclosure in the corporate annual reports of firms listed on the stock exchange of Hong Kong. Journal of Accounting and Public Policy, 14, 311-68.

  • Wong, M., & Gardner, C. T. (2005). Intellectual capital disclosure: New Zealand evidence, paper presented at 2005 AFAANZ Conference, Melbourne. Retrieved from www. afaanz.org/ web2005.pdf

  • Williams, S. (2001). Is intellectual capital performance and disclosure practices related?. Journal of Intellectual Capital, 2(3), 192-203.

  • White, G., Lee, A., & Tower, G. (2007). Drivers of voluntary intellectual capital disclosure in listed biotechnology companies. Journal of Intellectual Capital, 8(3), 517-37.

  • Whiting, R. H., & Miller, J. C. (2008). Voluntary disclosure of intellectual capital in New Zealand annual reports and the hidden value. Journal of Human Resource Costing & Accounting,12(1), 26-50

  • Whiting, R. H., & Woodcock, J. (2011). Firm characteristics and intellectual capital disclosure by Australian companies. Journal of Human Resource Costing & Accounting, 15 (2) 102-126

  • van der Meer-Kooistra, J., & Zijlstra, S.M. (2001). Reporting on intellectual capital. Accounting, Auditing & Accountability Journal, 14 (4), 456-76.

  • Vergauwen, P.G.M.C.,& van Alem, F.J.C. (2005).Annual report IC disclosures in The Netherlands, France and Germany.Journal of Intellectual Capital, 6(1), 89-104.

  • Yau, F.S., Chun, L.S.,& Balaraman, R. (2009).Intellectual capital reporting and corporate characteristics of public- listed companies in Malaysia.Journal of Financial Reporting & Accounting, 7 (1), 17-35

  • Yi, A.,& Davey, H. (2010).Intellectual capital disclosure in Chinese (mainland) companies.Journal of Intellectual Capital, 11(3), 326-47.

  • Zuliana, Z. (2007). Factors influencing intellectual capital disclosure: a Malaysian evidence, Master thesis, International Islamic University Malaysia, Kuala Lumpur.


Abstract Views: 548

PDF Views: 5




  • Determinants of Intellectual Capital Disclosure Practices of Indian Companies

Abstract Views: 548  |  PDF Views: 5

Authors

Amitava Mondal
Kalna College, Burdwan,West Bengal, India
Santanu Kumar Ghosh
Department of Commerce,The University of Burdwan, Burdwan, West Bengal, India

Abstract


Numerous academicians, business professionals, and consultants identified 'intellectual assets/capital' as the main factor of value creation in the present knowledge economy. Companies especially in the service sectors require maximum amount of this type of capital to maintain their existence in the competitive market, whereas empirical results show that companies disclose lesser amount of intellectual capital related information in the annual reports. In this study, we examine the factors that determine the proportion of intellectual capital disclosure in the annual reports. For the purpose of the study 30 Indian knowledge-intensive companies (software, pharmaceuticals, and finance) are selected (on the basis of highest market capitalisation) for the period 2009-2012. Content analysis of annual reports is done to prepare intellectual capital disclosure (ICD) index and efficiency of intellectual capital is measured through VAIC. Multiple regression analysis is applied to examine the relationship between dependent and independent variables. Empirical results show that audit committee's size, age, and firm size have positive relation with intellectual capital disclosure but VAIC, profitability, and leverage have negative relationship with intellectual capital disclosure. This negative association between intellectual capital efficiency and disclosure suggests that intellectually efficient companies disclose less information in the financial statement for fear of losing competitive advantage.

The present study is the first study in the Indian context that examines the determinant(s) of intellectual capital disclosure. However, this study is confined to 30 Indian knowledge companies for the period 2009-2012.


Keywords


IC Disclosure, Content Analysis, Indian Knowledge Companies, IC Efficiency.

References