Intellectual capital disclosure and corporate governance structure in UK firms

Abstract

This paper investigates the relationship between intellectual capital disclosure and corporate governance variables, controlling for other firm-specific characteristics, for a sample of 100 UK listed firms. Intellectual capital disclosure is measured by a disclosure index score, supported by word count and percentage of word count metrics to assess the variety, volume and focus of intellectual capital disclosure respectively. The independent variables comprise various forms of corporate governance structure: board composition, ownership structure, audit committee size and frequency of audit committee meetings, and CEO role duality. Results of the analysis based on the three measures of intellectual capital disclosure indicate significant association with all the governance factors except for role duality. The influence of corporate governance mechanisms on human, structural and relational capital disclosure, based on all three metrics, is also explored.

Corporate Governance and Corporate Social Responsibility Disclosure: Evidence from the US Banking Sector

“…CEOs are more likely to be appointed as chairs of the boards of directors if they have a successful track record or if they control a large proportion of the firm's shares (Hermalin and Weisbach, 1998). Moreover, as chairs of boards of directors have the ability to set the board's agenda and influence the information provided to the other board members, CEOs who also act as chairs can hide crucial information more easily from other, in particular non-executive, directors (Haniffa and Cooke, 2002;Li et al, 2008;Krishnan and Visvanathan, 2009). Being chair might also enable CEOs to influence board appointments in their favour (Haniffa and Cooke, 2002).…”

“…In such circumstances, when external corporate governance fails, internal corporate governance mechanisms, in particular boards of directors, are expected to play a key role in supervising managers and holding them to account (Fama, 1980;Hermalin and Weisbach, 2003;Li et al, 2008;Guest, 2009) show that board characteristics, such as board independence and CEO duality, can impact on firm behaviour; they also demonstrate the importance of differences in stakeholder interests.…”

“…Moreover, prior studies indicate that boards of directors with a high proportion of independent directors tend to facilitate a comparatively high degree of transparency and voluntary disclosure (Cheng and Courtenay, 2006;Patelli and Prencipe, 2007;Donnelly and Mulcahy, 2008;Li et al, 2008;Chau and Gray 2010). This suggests that independent directors are likely to support the disclosure of CSR activities to reduce information asymmetry between insiders and outsiders.…”

“…Since the provision of information increases the effectiveness of external control not only by informed investors, financial analysts and the business press (Healy and Palepu, 2001;Li et al, 2008; Beyer, Cogen, Thomas and Walther 2010) but also by other key stakeholders and the public, powerful CEOs are expected to use their influence to curtail voluntary disclosure, including CSR disclosure.…”

“…Unlike previous research into CSR disclosure, which relied on counting relevant words or sentences (e.g. Li, Pike and Haniffa, 2008;Kothari, Xu and Short, 2009;Haniffa and Cooke, 2005), we use content analysis to measure the comprehensiveness and quality of disclosed information in banks' annual reports. The rationale for this is that the quality of disclosure is more essential than the quantity (Hasseldine, Salama and Toms, 2005;Toms, 2002).…”