Intellectual capital disclosure: evidence from UK accounting firms

Abstract

Purpose The purpose of this paper is to examine the extent and quality of voluntary intellectual capital disclosures (ICD) by professional accounting firms (PAFs) in the UK. Design/methodology/approach The research method adopted for this study is content analysis considering the ICD in firms’ annual reports, corporate social responsibility reports, websites and recruitment materials. The sample for this research is based on 20 PAFs ranked by fee income. The paper employs institutional theory as its theoretical lens. Findings The findings of this paper show that ICDs vary across different forms of reports. The most frequently reported disclosure category is human capital, while the least reported category is internal capital. Monetary disclosures are most likely to relate to internal capital, while pictorial disclosures are most likely to relate to human capital. Research limitations/implications The sample size of the study is relatively small reflecting the extreme market concentration of accounting services in the UK and internationally. Future research can conduct a longitudinal study to capture the trend of reporting practices and consider narrative and discursive approaches to ICD. Originality/value No previous studies of intellectual capital (IC) disclosure have considered ICDs in professional service firms that are in themselves rich sources of human capital. Furthermore, the investigation uses a wide range of communications and assesses monetary, non-monetary, narrative and pictorial disclosures. This research extends both the IC disclosure and PAFs’ literatures.

Disclosure of Intellectual Capital Components in Integrated Reporting: An Empirical Analysis

“…As far as the methodological perspective is concerned, this research is based on the disclosure index technique, which is a partial and semi-objective form of content analysis of narratives in annual reports. Adopting this approach implies the need to provide an ex ante definition of a list of items to be found in the text [63], allowing readers to interpret the results and researchers to replicate the analysis [55]. This technique is consistent with the research objectives of the study, as it allows a rich description of the company's narrative disclosures, identifying characteristics embedded in the reports and quantifying qualitative information.…”

“…It is worth noting that the IIRC Framework considers human capital and social and relational capital as separate capitals, while IC studies adopt a different approach. In fact, although there is no a generally accepted definition of IC in the literature [15,[48][49][50], scholars refer to a tripartite classification: human capital, relational (or external) capital, and structural (or internal or organisational) capital [51][52][53][54][55].…”

Role of Corporate Governance in the Voluntary Disclosure of Intellectual Capital

“…The disclosures by IC intensive firms were found to be higher, and size was seen to be a highly significant determinant of extent and variety of ICD. Duff (2018) This process ensured the reliability of the extraction process. The use of technology helps in bringing out a more reliable and objective result and more importantly also eliminates human error (Oliveras and Kasperskaya, 2008).…”

Firm's Value Exploration: The Impact Of Intellectual Capital and Net Working Capital

“…Previous research trends indicate that IC has an effect on firm value and performance (Anifowose et al, 2018;Bayraktaroglu et al, 2019;Dzenopoljac et al, 2017;Nimtrakoon, 2015;Sardo & Serrasqueiro, 2017;Smriti & Das, 2018;Soetanto & Liem, 2019;Vishnu & Gupta, 2014). In addition, there has been also further research on IC reporting and disclosure (Anifowose et al, 2017;Beretta et al, 2018;Camodeca et al, 2018;Duff, 2018;Mangena et al, 2016;Melloni, 2015;Terblanche & Villiers, 2018;Wang et al, 2016). However, as far as is known, there has been still no research that attempts to reveal the relationship of IC and NWC with firm value.…”