Intellectual capital: mediator of board of directors’ effectiveness and adoption of International Financial Reporting Standards

Abstract

Purpose The purpose of this paper is twofold: to test whether intellectual capital mediates the relationship between board of directors’ effectiveness and adoption of International Financial Reporting Standards (IFRS) and to examine the contribution of the specific elements of intellectual capital and board of directors’ effectiveness to adoption of IFRS. Design/methodology/approach This study is cross-sectional. Usable questionnaires were received from 67 microfinance institutions (MFIs) that are members of the Association of MFIs of Uganda. The data was analyzed using Statistical Package for Social Sciences and MedGraph program (Excel version). Findings Results indicate that intellectual capital mediates the relationship between board of directors’ effectiveness and adoption of IFRS. Results further indicate that board independence and board meetings contribute significantly to the adoption of IFRS unlike board size and board committees. Results also indicate that in the intellectual capital elements, only structural capital and human capital significantly contribute to the adoption of IFRS unlike relational capital. Originality/value This study provides more insights on our understanding of the relationship between intellectual capital, board of directors’ effectiveness and adoption of IFRS. Specifically, it provides first time evidence of the mediation effect of intellectual capital in the relationship between board of directors’ effectiveness and adoption of IFRS using evidence from an African developing country – Uganda. Further, this paper adds to existing literature on corporate governance and reporting practices, as it provides more insights on the contribution of specific elements of board of directors’ effectiveness and intellectual capital to adoption of IFRS.

Intellectual capital and sustainability reporting practices in Uganda

“…Firms whose employees are more qualified and have obtained higher degree qualifications will have better sustainability reporting practices than those without. The finding that human capital does matter for sustainability reporting practices is consistent with the findings for Tumwebaze et al (2021) who found that human capital contributes significantly to the adoption of IFRS. Further, this study findings on human capital and sustainability reporting practices are in line with the findings of Kaawaase et al (2020) whose correlation analysis results indicated that human capital is significantly associated with both financial and non-financial performance.…”

“…For example, Bananuka (2020) found that structural capital is significantly correlated to internet financial reporting using evidence from Uganda. Tumwebaze et al (2021) found that structural capital contribute significantly to adoption of IFRS among Uganda's MFI.…”

“…Studies such as those of document that human capital is an important resource for adoption of integrated reporting among Uganda's listed firms. Tumwebaze et al (2021) found that human capital contributes significantly to adoption of IFRS among Uganda's Microfinance institutions (MFI). Bananuka (2020)…”

Sustainability performance disclosures: the impact of gender diversity and intellectual capital on GRI standards compliance in Uganda

“…First, this study contributes to perception-based studies on sustainability reporting (e.g. Tauringana, 2021a;Tumwebaze et al, 2021;Thoradeniya et al, 2015). Perception-based studies document the direct managerial motivations for the improved SPD, unlike those panel data studies that rely on information whose intention of its inclusion in a report is not known.…”

“…Available perception-based studies (e.g. Tauringana, 2021a;Tumwebaze et al, 2021;Thoradeniya et al, 2015) do not investigate the impact of gender diversity and intellectual capital on GRI-based SPD. Further, extant content analysis studies provide evidence from other contexts other than Uganda (e.g.…”