Conceptualisation of intellectual capital in analysts’ narratives: a performative view

Abstract

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.

Information about bank intangibles, analyst information intermediation, and the role of knowledge and social forces in the ‘market for information’

“…However, their findings are based entirely on the analyst reports. Our paper shows how IC information changes from the original disclosures provided by companies to that interpreted and reported by analysts, providing further evidence supporting Abhayawansa et al's (2018) arguments. The banking sector is very knowledgeintensive, and market failures in this sector highlight the importance of understanding how soft information is used by market participants.…”

“…Some previous research finds that sell-side analysts make extensive use of IC information in their valuation process (e.g., Abhayawansa et al 2015Abhayawansa et al , 2018. However, we find that there are significant differences between bank analysts' public information set (as narrative text) and their private information set.…”

“…As a result, the work of analysts remains a "black box" in academic literature. Several studies have peeked into this "black box" from different aspects, such as the inputs analysts use as the basis for their decisions (e.g., Brown et al 2015), the usage of information in their valuation models (e.g., Abhayawansa et al 2015;Imam et al 2008) and the outputs of analysts' decision making (e.g., Abhayawansa, Aleksanyan, & Cuganesan, 2018). However, there is no integrated model revealing the role of sell-side analysts in the process of information flowing from companies to investors.…”

“…Investigating how the same type of 'soft' information changes during the process of analyst research, analysis and reporting activities, provides novel insight into the analyst information intermediation role. Based on content analysis of analyst reports, Abhayawansa et al (2018) find that the relevance of intellectual capital (IC) elements in the eyes of analysts is conditional on the context. They argue that the identities of IC elements are variable, dynamic and transformative, and the role of IC needs to be understood in relation to different market actors who mobilise IC elements.…”

“…It should be notedAbhayawansa et al's (2018) content analysis were based on initiation coverage reports, which are argued to be the lengthiest, most detailed and substantiated type of sell-side reports, including comprehensive narratives about the company(Abhayawansa et al, 2018) and excluding incomplete follow-up reports(Flöstrand, 2006).…”