Intellectual capital: mediator of board of directors’ effectiveness and adoption of International Financial Reporting Standards
Journal of Financial Reporting and Accounting
ISSN: 1985-2517
Article publication date: 4 December 2020
Issue publication date: 28 May 2021
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.
Keywords
Acknowledgements
We acknowledge with gratitude the financial and moral support received from Makerere University Business School under the Faculty of Commerce research funding. This paper is extracted from a research project where two papers were previously published from. One of the papers titled ‘Audit committee effectiveness, Isomorphic forces, Managerial attitude and adoption of International Financial Reporting Standards’ was published in Journal of Accounting in Emerging Economies while the other titled ‘Determinants of adoption of international financial reporting standards in Ugandan microfinance institutions’ was published in African Journal of Economic and Management Studies. The authors thank the Editor in Chief Professor Khaled Hussainey and the Associate Editor Professor Sabri Boubaker for the insightful comments and timely feedback. The authors also wish to thank the two anonymous reviewers for the insightful comments. The authors also thank colleagues at the Makerere University Business School such as Dr Isaac Nkote and Professor Stephen Nkundabanyanga among others for the preliminary comments during faculty research seminar presentations.
Citation
Tumwebaze, Z., Bananuka, J., Alinda, K. and Dorcus, K. (2021), "Intellectual capital: mediator of board of directors’ effectiveness and adoption of International Financial Reporting Standards", Journal of Financial Reporting and Accounting, Vol. 19 No. 2, pp. 272-298. https://doi.org/10.1108/JFRA-03-2020-0076
Publisher
:Emerald Publishing Limited
Copyright © 2020, Emerald Publishing Limited