Purpose
Mandatory disclosure of a firm’s intellectual capital (IC) is restricted by accounting regulations, leading companies to use voluntary disclosure to inform their stakeholders about their IC. However, voluntary IC disclosure (ICD) is costly and may lead to a leak of knowledge. Consequently, firms should only engage in voluntary ICD if it really reduces information asymmetries and leads to reduced cost of capital or a better reputation. The purpose of this paper is to review, integrate and critically discuss the results of studies examining various effects of voluntary ICD.
Design/methodology/approach
The authors use a structured literature review approach.
Findings
The results mainly support the expected positive effects of voluntary ICD on monetary value for disclosing firms, e.g. lower cost of capital, higher firm value or increased analysts’ following. Nevertheless, the studies mainly represent second stage IC research.
Research limitations/implications
Additional studies concerning effects of voluntary ICD outside capital markets are recommended. Future studies should be based on an improved study design concerning the theoretical underpinning and concept of value relevance, sufficient sample sizes and alternative sources of ICD.
Practical implications
Due to positive monetary effects, firms should engage in voluntary ICD.
Originality/value
The paper reviews and integrates the state-of-the-art of empirical research of effects of voluntary ICD. It contributes to and enlarges the debate concerning the value relevance of voluntary ICD with respect to the different stages of IC research.
Because mandatory disclosure of intellectual capital (IC) is restricted by accounting regulations, companies invest in voluntary IC disclosure (ICD) to reduce information asymmetries and support an adequate firm valuation by investors and other stakeholders. So far numerous studies analysing the value relevance of voluntary ICD have been published revealing mixed results. Thus, it is the purpose of this paper to statistically integrate and to explain the heterogeneity of results by applying a meta-analysis with 122 effects of 40 primary studies. Our results mainly support the value relevance of voluntary ICD resulting in higher market value, lower cost of equity, and higher accounting performance. We identify weak moderating effects for legal origin, different IC categories and journal ranking. For further improving of disclosure quality, standard setters should develop disclosure standards for voluntary ICD. To reduce the heterogeneity of future studies a standardised scale for the measurement of voluntary ICD should be developed and applied.
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