Journal of Intellectual Capital

Purpose – Small and medium-sized companies (SMEs) have started to generate intellectual capital (IC) reports in order to enhance their management and corporate reporting. While the impact of a better management is quite clear, it is still unclear if an IC report has any impact on the rating of a company. The aim of this paper is to determine whether intellectual capital reports of SMEs generate any impact on the valuation behavior of analysts.

Design/methodology/approach – A test design was developed which comprised a literature review, a brain trust with financial experts, a quantitative survey, and an experiment with analysts based on two case studies.

Findings – If some requirements about structure and content of an IC report are fulfilled, it contributes to a more homogeneous rating than a rating based solely on information from financial reporting. Therefore, intellectual capital reports reduce risks for both investors/banks and SMEs.

Research limitations/implications – The research is based solely on German entities. It focuses on SMEs and their relevant capital market partners, which are banks. The results of the study indicate that also international analysts and companies could profit from additional information about IC.

Practical implications – The results of the study can be used to further develop and adapt IC reports to complement annual reporting according to analysts' requirements.

Originality/value – The paper helps to cover a well-documented information need of companies that want to communicate their IC to the capital market and do not know how and what kind of impact can be expected.