Proprietary costs of intellectual capital reporting: Malaysian evidence
Abstract
Purpose
The purpose of this paper is to examine the relationship between intellectual capital (IC) performance (value-added intellectual coefficient (VAIC)) and company characteristics with IC disclosure (ICD) in Malaysian listed companies.
Design/methodology/approach
Sample of the study is 68 biggest Malaysian companies listed in Malaysian Stock Exchange based on market capitalization in year 2006. The paper follows the classification of ICD by Huang et al. (2007), with three broad IC categories in 45 items. Content analysis was used to collect the IC information from the annual reports. Regression analysis was conducted for VAIC and its components. Log linear analysis was also conducted to cater the possible misspecification in the model.
Findings
Results of the study show that VAIC is negatively related to ICD. Further classification of VAIC shows that intellectual capital efficiency and human capital efficiency are negatively related to ICD whilst structural capital efficiency is not related to ICD. Company size and leverage are found to be positively related to ICD.
Research limitations/implications
Negative association between VAIC and ICD suggests that companies reduce ICD for competitive advantage reason which supports the proprietary cost theory. The findings of the study may provide some evidence to regulators to enhance the reporting practices of IC for the benefits of users of financial reporting in making relevant decisions. The focus should be given on the reporting of human capital items.
Originality/value
This is the first paper to use IC framework by Huang et al. (2007). Consistency of findings with other studies using different IC framework can be compared for the choice of IC framework in future studies.
Keywords
Acknowledgements
The authors would like to acknowledge the financial support from Universiti Utara Malaysia (UUM) for the research grant to conduct the study.
Citation
Kamardin, H., Abu Bakar, R. and Ishak, R. (2015), "Proprietary costs of intellectual capital reporting: Malaysian evidence", Asian Review of Accounting, Vol. 23 No. 3, pp. 275-292. https://doi.org/10.1108/ARA-04-2014-0050
Publisher
:Emerald Group Publishing Limited
Copyright © 2015, Emerald Group Publishing Limited