The value relevance of intellectual capital disclosures

Vafaei, A, Taylor, D and Ahmed, K 2011, 'The value relevance of intellectual capital disclosures', Journal of Intellectual Capital, vol. 12, no. 3, pp. 407-429.


Document type: Journal Article
Collection: Journal Articles

Title The value relevance of intellectual capital disclosures
Author(s) Vafaei, A
Taylor, D
Ahmed, K
Year 2011
Journal name Journal of Intellectual Capital
Volume number 12
Issue number 3
Start page 407
End page 429
Total pages 23
Publisher Emerald Group Publishing Limited
Abstract Purpose: This study aims to examine whether or not listed companies' disclosure of intellectual capital is value-relevant in share markets and to assess its moderating role in the value-relevance of reported earnings and equity following the adoption of international financial reporting standards (IFRS). Design/methodology/approach: A measure of intellectual capital disclosure (ICD), based on a content analysis of the text in annual reports sampled from listed companies in Britain, Australia, Hong Kong and Singapore, is incorporated in the models to examine the direct and moderating roles of ICD in a firm's valuation. Findings: The results reveal that ICD is positively associated with market price (i.e. has value relevance) in companies in two of the four countries and in non-traditional industries. Further, the incremental value relevance of earnings and net assets is mostly non-significant; however, interaction of these variables with ICD considerably increases the basic coefficients and the explanatory power of the models. Research limitations/implications: Prior research on the value relevance of reported accounting numbers has not considered the incremental effect of textual ICD in annual reports. This study extends value relevance models by combining textual ICD with accounting numbers in an attempt to assess investors' valuation of firms. Practical implications: From the findings, a case is made for corporate management (particularly in certain countries and industries) to integrate its accounting policy choices regarding good will and intangibles with its strategies for disclosure of broad intellectual capital information. Originality/value: First-time evidence is provided that text-based ICD is value-relevant in capital markets and on its moderating effect for the value-relevance of reported accounting numbers.
Subject Financial Accounting
Keyword(s) Incremental Value Relevance
Intellectual Capital Disclosure
Earnings
Equity
Financial Reporting
Standards
DOI - identifier 10.1108/14691931111154715
Copyright notice © Emerald Group Publishing Limited
ISSN 1469-1930
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Created: Fri, 09 Dec 2011, 08:24:00 EST by Catalyst Administrator
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