The value relevance of intellectual capital disclosure: empirical evidence from Kuwait

Mishari M. Alfraih (Department of Accounting, College of Business Studies, The Public Authority for Applied Education and Training, Kuwait City, Kuwait)

Journal of Financial Regulation and Compliance

ISSN: 1358-1988

Publication date: 13 February 2017



Drawing on market efficiency theory and studies on intellectual capital (IC) disclosure, this study aims to examine if IC information provided in the corporate annual reports of Kuwait Stock Exchange (KSE) listed companies in 2013 is value-relevant.


The analysis is divided into two parts. First, the level of intellectual capital disclosure (ICD) of KSE-listed companies is examined using the content analysis method. Second, the value relevance of financial reporting is examined empirically using Ohlson’s (1995) valuation model.


The results reveal that ICD is positively and significantly associated with market value, suggesting that greater ICD is valued by KSE market participants, who incorporate it into their valuation models.

Practical implications

Given the importance of ICD in enhancing equity valuation, a practical implication of this study is to make managers aware of its positive and significant effect on equity valuation, which may encourage companies to increase their level of disclosure.


This is the first study of the association between the level of ICD and the value relevance of financial reporting for market participants in Kuwait. It therefore extends and confirms the prior literature by broadening its scope to include frontier markets. Furthermore, it provides empirical evidence in support of recent calls from regulators and professional bodies for information that supplements and complements traditional financial reporting.



Alfraih, M. (2017), "The value relevance of intellectual capital disclosure: empirical evidence from Kuwait", Journal of Financial Regulation and Compliance, Vol. 25 No. 1, pp. 22-38.

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