Capital market pressures and the format of intellectual capital disclosure in intellectual capital intensive firms

Abstract

Purpose

A number of studies have examined firms’ intellectual capital (IC) disclosure practices. However, the presentation format of IC disclosure (text, numerical and graphs/pictures) is yet to be examined. In addition, there is little evidence on the impact of capital market pressures on IC disclosure. The purpose of this paper is to examine the relation between presentation format of IC disclosures and three market factors (market-to-book ratio, share price volatility and multiple listing (ML)).

Design/methodology/approach

Using content analysis, the authors examine the level of IC disclosure provided in the annual reports of 100 IC-intensive listed UK firms. A 61-IC-item research instrument is used to measure IC disclosure and regression analysis is employed to examine the relation between disclosure and the market factors, controlling for corporate governance and firm-specific variables.

Findings

Text is the most commonly used format for IC disclosure, whilst the use of graphs/pictures is very low. The findings of the relation between market factors and IC disclosure are mixed. Market-to-book ratio is significantly related to disclosure in text and numerical, but not to graphs/pictures. Share price volatility is only associated with graphs/pictures, whilst ML is only related to text.

Originality/value

The authors findings suggest that the impact of capital market pressures on IC disclosure might differ with presentation format. In this context, the study makes a significant contribution to the IC disclosure literature.

Citation

Li, J. and Mangena, M. (2014), "Capital market pressures and the format of intellectual capital disclosure in intellectual capital intensive firms", Journal of Applied Accounting Research, Vol. 15 No. 3, pp. 339-354. https://doi.org/10.1108/JAAR-12-2013-0117