This paper investigates the role of intellectual capital information (ICI) in sell-side analysts' fundamental analysis and valuation of companies. Using in-depth semi-structured interviews it penetrates the black-box of analysts' valuation decision making by identifying and conceptualising the mechanisms and rationales by which ICI is integrated within their valuation decision processes.We find that capital market participants are not ambivalent to ICI, and ICI is used: (1) to form analysts' perceptions of the overall quality, strengths and future prospects of companies; (2) in deriving valuation model inputs; (3) in setting price targets and making investment recommendations; and (4) as an important and integral element in analyst-client communications. We show that: there is a 'pecking order' of mechanisms for incorporating ICI in valuations, based on quantifiability; IC valuation is grounded in valuation theory; there are designated entry points in the valuation process for ICI; and a number of factors affect analysts' ICI use in valuation. We also identify a need to redefine 'value-relevant' ICI to include non-price sensitive information; acknowledge the boundedness and contextuality of analysts' rationality and motives of their ICI use; and the important role of analyst-client meetings for ICI communication.

This paper explores the ways in which sell‐side (SS) financial analysts seek to position themselves advantageously within the wider field of investment advice in spite of widespread skepticism over the value that their forecasts and recommendations add to investment decisions. The field of investment advice has been characterized in recent years by a number of regulatory and technological changes that have forced SS analysts to reconstitute the ways in which they influence the investment decisions of buy‐side (BS) actors. Faced with existential threats, SS analysts have responded to the disruptive impact of technology and regulation by struggling hard to ensure that their services are still valued by fund managers. Key to this ongoing process is the recalibration of professional expertise, which previous research has alluded to but not explored in detail. Central to the persistence of SS analysts in processes of investment decision making are activities revolving around the production and use of analyst reports which, our findings indicate, are less valuable for their informational content than their role as “relational devices,” ascribing legitimacy to SS analysts and earning them an entry ticket to more substantive, value‐adding interactions with companies and BS actors. We also show that economic considerations in the area of investment advice are influenced by social ties, the motivations of various actors in the field, and their relative position vis‐à‐vis other actors. More generally, we contribute to the literature on professional projects by showing how professional groups are constantly engaged in attempts to reposition themselves in the social space, but that field‐level changes can restrict the outcomes of these strategies to mitigation rather than advancement for the professionals concerned.

Purpose-This study tests the performativity of Intellectual Capital (IC) from the perspective of sell-side analysts, a type of actor who consumes and creates IC information and in whose practice IC information plays a significant role. Design/methodology/approach-The empirical component of the study comprises a narrative analysis of the text of a large corpus of sell-side analysts' initiation coverage reports. We adopt Mouritsen's (2006) performative and ostensive conceptualisations of IC as our theoretical framework. Findings-We find that the identities and properties of IC elements are variable, dynamic and transformative. The relevance of IC elements in the eyes of analysts is conditional on the context, temporally contingent and bestowed indirectly. IC elements are attributed to firm value both directly, in a linear manner, and indirectly, via various non-linear interrelationships established with other IC elements, tangible capital and financial capital. Research limitations/implications-This study challenges the conventional IC research paradigm and contributes towards a performativity-inspired conceptualisation of IC and a resultant situated model of IC in place of a predictive model. Originality/value-This is the first study to apply a performative lens to study IC identities, roles and relationships from the perspective of a field of practice that is external to the organisation where IC is hosted. Examining IC from analysts' perspective is important because not only can it provide an alternative perspective of IC, it also enables an understanding of analysts' field of practice.