IC disclosure practices in India using a comprehensive disclosure framework

Abstract

Purpose This paper aims to address the need to modify the existing intellectual capital (IC) disclosure frameworks and examines the disclosure practices of Indian knowledge-based companies by using a comprehensive IC disclosure index that has been developed in this study. Design/methodology/approach The annual reports of 30 listed knowledge-intensive companies from two sectors – pharmaceutical sector and engineering sector – have been analysed for a period of five years from 2010-2011 to 2014-2015. Additionally, the sample firms were ranked on the basis of market capitalisation (MC) to examine the IC reporting practice of firms with high and low MC. An IC disclosure index has been developed through comparative analysis of the frameworks used in three studies that is based on Bukh et al.’s (2001) classification. Further, the study has also considered intangibles and the related non-financial indicators of MERITUM guidelines. The disclosure index consists of a total of 69 items encompassing six components. Findings The overall IC disclosure trend showed an increase in reporting practice over the five-year study period. With respect to the components, process capital is found to be the most disclosed component while relational capital is the least disclosed component. After categorisation of firms into high and low MC, it has been observed that the IC disclosure scores of firms with high MC are significantly higher than firms with low MC. Practical implications This paper has developed an IC disclosure index through careful analysis and scrutiny of the existing frameworks which contributes to the existing literature. Likewise, the use of a comprehensive framework can aid the investors to know the true value of the firm and make proper market decisions. Originality/value This is the first paper in the Indian context in which a modified IC disclosure index is framed based on Bukh et al. (2001) framework for examining IC reporting practices.

Disclosure Pattern of Labour Practices and Decent Work and Its Impact on Corporate Financial Performance: Evidence from Asia

“…Some of the notable guidelines are framework of Guthrie and Petty (2000), Bontis (2003), International Symposium on Measuring and Reporting Intellectual Capital co-sponsored by Organisation for Economic Co-operation and Development (OECD) (1999), Danish Agency for Trade and Industry (1998) and Work Life 2000 (1998). Empirically, researchers have observed a positive influence of IC disclosure on firm value (Orens, Aerts, & Lybaert, 2009; Anam, Fatima, & Majdi, 2011; Maji & Goswami, 2018). However, this dimension of research is associated with human capital, organizational capital and relation capital, and it provides less importance on the LA indicators of workforce.…”

Effectiveness Of Disclosure In Information Asymmetry In Companies LQ45

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Intellectual Capital and Value of the Firm: A Systematic Literature Review

“…Human capital is a critical component of intellectual capital as it represents individuals' intellectual and creative potential. It influences a firm's ability to innovate, adapt to change, and execute strategies effectively (Maji & Goswami, 2018). Investments in employee training and development, talent acquisition, and fostering a culture of continuous learning and knowledge sharing are key to nurturing and leveraging organizational human capital .…”