The role of audit committee attributes in intellectual capital disclosures

2015 ◽  
Vol 30 (8/9) ◽  
pp. 756-784 ◽  
Author(s):  
Abdifatah Ahmed Haji
Keyword(s):  
Intellectual Capital ◽  
Audit Committee ◽  
Financial Information ◽  
Policy Changes ◽  
Integrated Reporting ◽  
Content Type ◽  
Corporate Reporting ◽  
Reporting Process

Purpose – This study aims to examine the role of audit committee attributes in non-financial information releases, with a focus on intellectual capital (IC) disclosures, following significant policy changes, mandating the audit committee function in Malaysia. The study argues that, given the changing informational needs of stakeholders and the ongoing discussion on integrated reporting, the role of the audit committee should extend to ensuring the overall quality of corporate reporting. Design/methodology/approach – The study draws evidence from a sample of leading Malaysian companies based on their market capitalisation over a three-year period (2008-2010), a period subsequent to the recent policy changes. The extent and quality of IC information, as a surrogate of non-financial information, was measured and regressed against several audit committee attributes, such as audit committee size, independence, financial expertise and meetings, controlling the overall governance and firm-specific variables. Findings – The findings show a strong positive role of the audit committee function in the overall amount of IC information as well as all three subcomponents of IC information (internal, external and human capital). The results are robust to controls for the overall governance and firm-specific attributes as well as different measures of IC information. Practical implications – The results suggest that the role of the audit committee function extends to non-financial information communication such as IC. Policymakers in Malaysia should, therefore, build on the recent regulatory changes and encourage audit committees to ensure that the overall quality of corporate reporting processes include social, environmental, intellectual as well as financial capital of a firm. Originality/value – This study considers the role of the audit committee in the wider corporate reporting process – drawing attention to its potential role in the espoused integrated business reporting. It also challenges the taken-for-granted assumption that restricts the role of the audit committee function to the traditional financial reporting process.

Drivers for voluntary intellectual capital reporting based on agency theory

2019 ◽  
Vol 20 (2) ◽  
pp. 264-281 ◽  
Author(s):  
Viktoria Goebel
Keyword(s):  
Propensity Score ◽  
Agency Theory ◽  
Propensity Score Matching ◽  
Intellectual Capital ◽  
Integrated Reporting ◽  
Content Type ◽  
The Relationship ◽  
Practical Implications ◽  
Management Report

PurposeThe purpose of this paper is to investigate the drivers for voluntary intellectual capital (IC) reporting based on agency theory. This study responds to calls for critical investigations of IC reporting utilising Goebel’s (2015a) IC measuring approach to investigate the role of IC value and mispricing for IC reporting.Design/methodology/approachA mandatory management report offers a unique research setting in Germany. The content analysis results of 428 German management reports are used in a regression analysis with leverage, ownership diffusion, IC value and mispricing. Additionally, a propensity score matching approach examines the relationship between IC reporting and IC value.FindingsThe regression results show that companies use voluntary IC reporting to encounter mispricing. IC reporting is negatively associated with leverage, whereas ownership diffusion and IC value show no significant results. The propensity score matching approach is also not significant.Research limitations/implicationsThis study contributes to strengthening and testing agency theory for IC reporting. As mispricing is identified to play an important role for IC reporting, IC research should account for mispricing.Practical implicationsThe findings suggest to reopen a discussion on the declared aims of the German management report and the international integrated reporting model to provide information on value creation, as IC value shows no link to IC reporting.Originality/valueThis study innovatively links IC reporting to IC value and mispricing to investigate drivers for voluntary IC reporting.

It is not always bad news

2018 ◽  
Vol 31 (5) ◽  
pp. 1319-1348 ◽  
Author(s):  
Mary-Anne McNally ◽  
Warren Maroun
Keyword(s):  
Impression Management ◽  
Financial Reporting ◽  
Value Creation ◽  
Sustainability Reporting ◽  
Management Control ◽  
Financial Information ◽  
Accounting System ◽  
Integrated Reporting ◽  
Content Type ◽  
Corporate Reporting

Purpose The purpose of this paper is to challenge the notion that non-financial reporting is mainly about impression management or is only a superficial response to the hegemonic challenges posed by the sustainability movement. It focuses on the most recent development in sustainability reporting (integrated reporting) as an example of how accounting for financial and non-financial information has the potential to expand the scope of accounting systems, promote meaningful changes to reporting processes and provide a broader perspective on value creation. Design/methodology/approach The research focuses on an African eco-tourism company which has its head office in South Africa. A case study method is used to highlight differences in the presentation of an integrated business model according to the case entity’s integrated reports and how individual preparers interpret the requirement to prepare those reports. Data are collected using detailed interviews with all staff members involved in the preparation process. These are complemented by a review of the minutes of the company’s sustainability workshops and integrated reports. Findings A decision by the case organisation to prepare an integrated report gives rise to different forms of resistance which limits the change potential of the integrated reporting initiative. Resistance does not, however, preclude reform. Even when individual preparers are critical of the changes to the corporate reporting environment, accounting for financial and non-financial information expands the scope of the conventional accounting system which facilitates broader management control and promotes a more integrated conception of “value”. Research limitations/implications Integrated reporting should not be dismissed as only an exercise in corporate reporting and disclosure; it has a transformative potential which, given time, can enable new ways of managing business processes and articulating value creation. Originality/value This study answers the calls for primary evidence on how the requirement or recommendation to prepare an integrated report is being interpreted and applied by individual preparers. The findings add to the limited body of interpretive research on the change potential of new reporting frameworks. In doing so, the research provides theoretical support for developing arguments which challenge the conventional position that integrated reporting is little more than an exercise in impression management.

Intellectual capital disclosure in integrated reporting: an impression management analysis

2015 ◽  
Vol 16 (3) ◽  
pp. 661-680 ◽  
Author(s):  
Gaia Melloni
Keyword(s):  
Content Analysis ◽  
Impression Management ◽  
Intellectual Capital ◽  
Design Methodology ◽  
Public Perceptions ◽  
Integrated Reporting ◽  
Content Type ◽  
International Integrated Reporting Council ◽  
The Relationship

Purpose – Intellectual capital (IC) is fundamental to understanding how firms create value; however, current IC disclosure (ICD) has been described as inadequate due to the lack of an established IC framework and companies’ actual commitment to report IC information. The International Integrated Reporting Council aims to foster ICD by means of integrated reporting (IR); such a report should display how IC and other forms of capital (e.g. financial) contribute to value creation over time. Drawing on impression management (IM) studies, the purpose of this paper is to assess the quality of ICD offered in IR. Design/methodology/approach – A manual content analysis of all the reports available in the International Integrated Reporting Council web site is run considering both the content of ICD and specific linguistic attributes (evidence, time orientation and tone). In addition, the study tests the relationship between the positive ICD tone and specific characteristics that may incentive managers to manipulate their disclosure to determine whether firms use ICD to manage public perceptions of corporate behaviour. Findings – The results of the content analysis show that majority of ICD is focused on relational capital, with limited quantitative and forward-looking information. Additionally, compared to non-ICD, ICD is significantly more optimistic. Furthermore, the positive tone of ICD is significantly associated with declining performance, bigger size and higher level of intangibles supporting the use of ICD as an IM strategy. Originality/value – The research contributes to the literature offering evidence of the quality of the ICD offered in the IR and demonstrating that ICD offered in the IR is used by managers opportunistically to advance their image.

The role of controlling shareholders in determining investments of intellectual capital among Taiwanese semiconductor companies

2019 ◽  
Vol 21 (1) ◽  
pp. 62-86 ◽  
Author(s):  
Chin-Hsien Hsieh ◽  
Irene Wei Kiong Ting ◽  
Jawad Asif ◽  
Hanh Thi My Le
Keyword(s):  
Intellectual Capital ◽  
Negative Relationship ◽  
Value Added ◽  
Integrated Reporting ◽  
Reporting Standard ◽  
International Financial Reporting Standard ◽  
Optimal Point ◽  
Content Type ◽  
Controlling Shareholders

Purpose Although intellectual capital (IC) has been proven to be value-added for companies, the drivers of IC performance remain an under-researched area. From the perspective of corporate governance, the purpose of this paper is to examine how controlling the ownership of shareholders would influence IC performance. Design/methodology/approach This study utilized value-added intellectual capital (VAICTM) and its subcomponents, namely human capital, structural capital and capital employed efficiencies, to proxy for IC performance and regression analyses to assess the association between controlling the ownership of shareholders and the IC performance of Taiwanese listed semiconductor firms for the years 2009–2017. Findings Results show that controlling the ownership of shareholders is nonlinearly related to IC performance. Specifically, controlling their ownership positively affects the level of IC performance up to an optimal point before it turns to be a negative relationship thereafter. Practical implications The results of this study can help policy makers and other stakeholders understand the role of controlling shareholders in determining IC performance. The findings of this study suggest a nonlinear relationship between controlling the ownership of shareholders and IC. Originality/value This study provides an extended perspective in studies related to the determinants of IC by considering the resources provided by controlling shareholders. The definitions of controlling interests and IC applied in this study are compared and aligned with those found in the International Financial Reporting Standard 10 – Consolidated Financial Statements and the International Integrated Reporting Council, respectively.

A research template to evaluate the degree of accountability of integrated reporting: a case study

2017 ◽  
Vol 25 (4) ◽  
pp. 675-704 ◽  
Author(s):  
Antonella Silvestri ◽  
Stefania Veltri ◽  
Andrea Venturelli ◽  
Saverio Petruzzelli
Keyword(s):  
Stakeholder Involvement ◽  
Integrated Reporting ◽  
Content Type ◽  
Research Framework ◽  
Specific Research ◽  
Study Approach ◽  
Interpretative Approach

Purpose The scope of the study is to analyze an Italian family firm operating in the transformation and marketing of durum wheat to investigate the degree of accountability of the integrated reporting (IR) disclosed by the organization. Design/methodology/approach The paper uses a case study approach proposing a specific research template to evaluate the implementation of IR depicting the role of three main dimensions: stakeholder involvement, business model and integration. Findings The paper enriches theoretical conceptualization of the implementation of IR proposing a new conceptual model that adds empirical findings to the literature on IR and at the same time addresses the call for studies of Dumay et al. (2016) to engage more with practice and development on IR. Research limitations/implications The use of a specific research framework constitutes both the main strength of the paper and also its main limit, as the dimensions of the framework have been chosen by the authors, and the observations and conclusions are based on the authors’ analysis under an interpretative approach. Practical implications The implementation of the same research framework to other organizational IR documents could allow comparisons to be expressed on the quality of the IR disclosed by different organizations and on the same organization in different periods of time. Originality/value The main originality of this paper is the creation and the employment of a specific template to analyze the degree of accountability of the case study selected representing a non-listed Italian company operating in the food industry.

An intellectual capital ontology in an integrated reporting context

2019 ◽  
Vol 20 (1) ◽  
pp. 83-99 ◽  
Author(s):  
Riccardo Stacchezzini ◽  
Cristina Florio ◽  
Alice Francesca Sproviero ◽  
Silvano Corbella
Keyword(s):  
Intellectual Capital ◽  
Value Creation ◽  
Social Ontology ◽  
Integrated Reporting ◽  
Core Element ◽  
Content Type ◽  
Creation Story ◽  
Socially Constructed ◽  
The Empirical Analysis

Purpose The purpose of this paper is to investigate the intellectual capital (IC) ontology in an integrated reporting context to explore the function that integrated report (IR) preparers assign to IC elements and the role of integrated thinking in this process. Design/methodology/approach Social ontology theory helps elucidate how an energy-sector company socially constructed an IC ontology in which IC is a core element of the value creation story told in the IR. The empirical analysis benefited from in-depth interviews with the corporate staff. Findings The subjective nature of IC ontology emerges, in that IC’s function is defined during the very process of IR preparation. The intangible elements drive sustainability-oriented financial value creation according to the sustainability approach embraced by the company’s business model. Integrated thinking both facilitates this perspective on IC is shared among various departments of the company and provides a procedure for scrutinising what counts as IC in this integrated reporting context. Research limitations/implications The research scope is limited to the IR preparation process. Further research could explore IC ontologies beyond this process. Originality/value This study is the first to explore IC ontology empirically within an innovative integrated reporting context. It opens paths to further research on the relationships between IC and integrated thinking.

scholarly journals Analysis of the integrated reporting use in EU countries

2020 ◽  
Vol 18 (3) ◽  
pp. 106-117
Author(s):  
Magdalena Bochenek
Keyword(s):  
Critical Analysis ◽  
Statistical Technique ◽  
Financial Information ◽  
The European Union ◽  
Integrated Reporting ◽  
Eu Countries ◽  
Corporate Reporting ◽  
The Relationship ◽  
The Eu

Integrated reporting (IR) is an important element in the development of corporate reporting in the European Union (EU). It turns out that stakeholders need not only financial but also non-financial information about the company. Due to changes in the environment, the role of CSR is growing. Enterprises undertake more and more pro-social and pro-environmental activities. European countries and organizations introduce regulations and recommendations that are to improve and standardize IR. The article aims to present IR within the EU and analyze the relationship between the number of reports prepared and the welfare of individual countries. Research methods used in the article are study by action, statistical technique, and critical analysis of literature. The development of IR in the EU is briefly described. It was also analyzed whether there is a correlation between the popularity of IR in a country and its wealth. A high correlation was found between the wealth of a given country and the number of integrated reports prepared. The wealthier the country, the more integrated reports are made there. There is a big difference in the popularity of IR between the EU countries which joined the EU before 2004 and those in the EU from 2004 or later. More than 200 integrated reports are prepared in the countries that joined the EU before 2004 than in the countries that joined the EU in 2004 or later. Although the popularity of IR is growing steadily, there are still a few EU countries where integrated reports are hardly ever present.

Sustainability reporting or integrated reporting: Which one is valuable for investors?

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ika Permatasari ◽  
Ika Permatasari ◽  
I Made Narsa
Keyword(s):  
Value Relevance ◽  
Accounting Information ◽  
Sustainability Reporting ◽  
Financial Information ◽  
Integrated Reporting ◽  
Content Type ◽  
Reporting Practices ◽  
Corporate Reporting ◽  
Sustainability Reports ◽  
International Integrated Reporting Council

Purpose This research is motivated by the development of dialogue and debate regarding company reporting in the form of sustainability reporting (SR) – which is separate from the annual report (AR) – or integrated reporting (IR). Research into SR and IR is still fascinating, and this study addresses the debate about them. This study aims to examine which of the two reports is more valuable for investors, and also examine whether IR has value relevance because the information in the IR could reinforce the importance of the accounting information. Design/methodology/approach As with previous studies, we adopted a valuation approach – the Ohlson model – to assess the value relevance of non-financial information (in the form of SR/IR) and financial information. As a preliminary study, we used non-financial information as a binary variable, i.e. a group of companies that issue sustainability reports and a group of companies that issue integrated reports. Therefore, they complement and interact with the financial statements’ information. This paper used panel data consisting of 931 firm-years of SR issuers and 922 firm-years of IR issuers in Europe and Africa in the period from 2005 to 2019. Findings The results showed that SR had a higher value relevance than IR. However, when the authors interact the corporate reporting form with the accounting information, IR had value relevance because the information contained in the IR could reinforce the importance of the accounting information. Practical implications This study will support regulators in various countries to monitor the reporting practices of companies in those countries. The results of this study provide evidence that sustainability reports get a higher response than integrated reports. However, when interacted with the accounting variables, information in the IR is considered to be more relevant than that found in the SR. Therefore, it is hoped that the results of this study will help the International Integrated Reporting Council (IIRC) in reviewing IR practices around the world so that the implementation of IR practices can be realized in accordance with the mission that the IIRC wants to achieve. Originality/value Research into the value relevance of SR and IR has been carried out by several previous researchers separately, but to the best of the author’s knowledge, there are no studies comparing the value relevance of the two.

scholarly journals Integrated reporting and narrative accountability: the role of preparers

2018 ◽  
Vol 31 (5) ◽  
pp. 1381-1405 ◽  
Author(s):  
Alessandro Lai ◽  
Gaia Melloni ◽  
Riccardo Stacchezzini
Keyword(s):  
Corporate Accountability ◽  
Integrated Reporting ◽  
Content Type ◽  
Corporate Reporting ◽  
International Integrated Reporting Council ◽  
Narrative Mode ◽  
Functionalist Approach ◽  
The Empirical Analysis ◽  
Depth Interviews

Purpose The International Integrated Reporting Council claims that integrated reporting (IR) can enhance corporate accountability, yet critical and interpretative studies have contested this outcome. Insufficient empirical research details how preparers experience accountability while constructing IR; to fill this gap, the purpose of this paper is to analyse how the preparers’ mode of cognition influences the patterns of accountability associated with IR. Design/methodology/approach A functionalist approach to narratives helps elucidate the role that the IR preparers’ narrative mode of cognition plays on accountability towards stakeholders. The empirical analysis particularly benefits from in-depth interviews with the IR preparers of a global insurer that has used IR since 2013. Findings The preparers’ narrative mode of cognition facilitates dialogue with IR users. It addresses accountability tensions by revealing the company’s value creation process. Preparers’ efforts to establish a meaningful dialogue with a growing variety of stakeholders through broader and plainer messages reveals the potential of IR as a narrative source of a socializing form of accountability. However, financial stakeholders remain the primary addressees of the reports. Research limitations/implications This paper focusses on preparers’ views; further research should integrate users’ accountability expectations. Originality/value This paper offers new insights for dealing with corporate reporting and accountability in a novel IR setting.

Financial statement informativeness and intellectual capital disclosure

2015 ◽  
Vol 13 (1) ◽  
pp. 66-90 ◽  
Author(s):  
Anis Maaloul ◽  
Daniel Zéghal
Keyword(s):  
Intellectual Capital ◽  
Explanatory Power ◽  
Financial Information ◽  
Financial Statement ◽  
Annual Reports ◽  
High Tech ◽  
Content Type ◽  
Accounting Recognition ◽  
The Relationship

Purpose – The purpose of this paper is to analyse the relationship between financial statement informativeness (FSI) and intellectual capital disclosure (ICD). Design/methodology/approach – While FSI was measured as the explanatory power of financial information in explaining market value, ICD was collected through content analysis of annual reports. A sample of 126 US companies, divided into two groups – high-tech and low-tech companies – were used in this study. Empirical analysis was carried out using the Poisson regression method. Findings – The results show a negative (substitutive) relationship between FSI and ICD, especially in high-tech companies. This indicates that companies with low FSI disclose more information about their IC in annual reports. Practical implications – This study confirms the role of voluntary ICD as a solution towards mitigating the problem of the distortion of financial information due to the lack of accounting recognition of IC as an asset in the financial statements. Originality/value – This is the first empirical study to analyse the relationship between FSI and ICD. Therefore, it serves as feedback to the regulators and standard-setters that recently published recommendations on voluntarily disclosing IC.

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