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Journal cover: Journal of Human Resource Costing & Accounting

Journal of Human Resource Costing & Accounting

ISSN: 1401-338X
This journal ceased publication in 2012

Online from: 1996

Subject Area: Accounting and Finance

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Is there an association between intellectual capital disclosure, underpricing and long-run performance?


Document Information:
Title:Is there an association between intellectual capital disclosure, underpricing and long-run performance?
Author(s):J-L.W. Mitchell van der Zahn, (School of Accounting, Curtin University of Technology, Perth, Australia), Inderpal Singh, (Curtin University of Technology, Perth, Australia), Joshua Heniro, (Curtin University of Technology, Perth, Australia)
Citation:J-L.W. Mitchell van der Zahn, Inderpal Singh, Joshua Heniro, (2007) "Is there an association between intellectual capital disclosure, underpricing and long-run performance?", Journal of Human Resource Costing & Accounting, Vol. 11 Iss: 3, pp.178 - 213
Keywords:Company performance, Disclosure, Economic returns, Intellectual capital, Singapore
Article type:Research paper
DOI:10.1108/14013380710843773 (Permanent URL)
Publisher:Emerald Group Publishing Limited
Abstract:

Purpose – Excessive initial trading day returns (termed underpricing (UP)) and poor long-run performance (LRP) are two well-documented anomalies associated with initial public offerings (IPOs).The primary objective of this study is to empirically test the association between the extent of intellectual capital (IC) disclosure in the prospectus of an unseasoned IPO and: UP and LRP.

Design/methodology/approachEx ante uncertainty surrounding IC – recognized as the pivotal resource underlying a firm's future value creation and sustainable competitive advantage in the “new economic” era – is likely to be high. Unseasoned IPOs world-wide are increasing with many IPOs heavily IC-reliant. Given ex ante uncertainty surrounding IC, there is an escalating need to understand how disclosure of information related to IC can reduce an IPO's cost of capital (i.e. UP) and provide an indication of LRP. The analysis is based on a sample of 228 Singapore IPOs listing during the period 1997-2003. IC disclosure (ICDisc) in IPO prospectuses is measured using an 81-item researcher constructed disclosure index.

Findings – Empirical findings indicate, contrary to expectations, a positive (negative) ICDisc-UP (ICDisc-LRP) association.

Practical implications – It is the opinion that regulators, scholars and practitioners alike need to pay attention to developing a responsible model for reporting IC information so as to prevent a potentially unhealthy speculative environment driven by over-optimism.

Originality/value – The study is the first to simultaneously investigate the linkage between ICDisc and UP and: LRP.



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