An explanation of human capital disclosure from the resource based perspective

Though the importance of human capital (HC) in firm value creation is firmly established in the literature the level of emphasis placed on human capital disclosure (HCD) by preparers of financial statements and sell-side analysts is minimal. The purpose of this paper is to address this dilemma by critically analysing the conceptualisation of human capital in disclosure literature and introduce a more germane explanation

Intellectual capital information and stock recommendations: impression management?

Purpose \u2013 The purpose of this paper is to investigate what and how intellectual capital information (ICI) conveyed through analyst reports varies by the type of stock recommendation. It draws on the theory of impression management. Design/methodology/approach \u2013 Content analysis is used to investigate ICI in the full text of sell-side analysts\u2019 initiating coverage reports. It categorises ICI by type and three qualitative characteristics: evidence; time orientation; and news-tenor. It explores how the extent, types and qualitative characteristics of ICI found in analyst reports vary by the type of stock recommendation accompanying the analyst report. Findings \u2013 Given the conflicting interests facing analysts and relative amenability of ICI, it was found that analysts use ICI to manage perceptions. In particular, analysts attempt to use ICI in their reports to subdue the pessimism associated with an unfavourable recommendation, increase credibility of favourable recommendations and distinguish sell from hold recommendations. Practical implications \u2013 The paper contributes to the literature on impression management by extending its application to the study of sell-side analysts\u2019 decision processes and it alerts future researchers to the wider role played by ICI beyond its use in generation of forecasts and valuations. The paper\u2019s findings have implications for consumers of analyst reports, as the level of negativity/ positivity of forecasts and recommendations may be altered as a result of the semantics associated with ICI. Originality/value \u2013 This paper explores analysts\u2019 use of ICI conditional on the type of stock recommendation accompanying the report. Findings are explained using the theory of impression management. Keywords Financial analysis, Stocks, Intellectual capital, Impression management, Sell-side analysts, Stock recommendations Paper type Research pape

Connecting the COVID-19 pandemic, environmental, social and governance (ESG) investing and calls for ‘harmonisation’ of sustainability reporting

We critically examine the call for ‘harmonisation’ of sustainability reporting frameworks and standards that occurred alongside an increase in environmental, social and governance (ESG) investing during the COVID-19 pandemic. We identify three myths that have been promulgated in calls for ‘harmonisation’ that seek to: simplify sustainability reporting and ESG analysis and shift the control for standard-setting to an investor-oriented private sector body. We argue that the myths are based on deception, misunderstandings, and disregard for both academic research and the views of sustainability practitioners. They demonstrate a lack of regard for different users of corporate sustainability information, a lack of analysis of the alternatives, an overestimation of the International Financial Reporting Standards (IFRS) Foundation’s expertise and mischaracterisation of sustainable/ESG financing

Towards a conceptual framework for non-financial reporting inclusive of pandemic and climate risk reporting

Purpose: This paper evaluates non-financial reporting (NFR) frameworks insofar as risk reporting is concerned. This is facilitated through analysis of the adequacy of climate- and pandemic-related risk reporting in three industries that are both significantly impacted by the COVID-19 pandemic and at risk from climate change. The pervasiveness of pandemic and climate-change risks have been highlighted in 2020, the hottest year on record and the year the COVID-19 pandemic struck. Stakeholders might reasonably expect reporting on these risks to have prepared them for the consequences. Design/methodology/approach: The current debate on the 'complexity' of sustainability and NFR frameworks/ standards is critically analysed in light of the COVID-19 pandemic and calls to 'build back better'. Context is provided through analysis of risk reporting by the ten largest airlines and the five largest companies in each of the hotel and cruise industries. Findings: Risk reporting on two significant issues, pandemics and climate change, is woefully inadequate. While very little consideration has been given to pandemic risks, disclosures on climate-related risks focus predominantly on 'risks' of increased regulation rather than physical risks, indicating a short-term focus. The disclosures are dispersed across different corporate reporting media and fail to appreciate the long-term consequences or offer solutions. Mindful that a conceptual framework for NFR must address this, we propose a new definition of materiality and recommend that sustainable development risks and opportunities be placed at the core of the future framework for connected/integrated reporting. Research implications: In order for sustainable development risks to be perceived as ‘real’ by managers further research is needed to determine the nature and extent of key sustainable development risks and the most effective mitigation strategies. Social implications: Our paper highlights the importance of recognising the complexity of the issues facing organisations, society and the planet and addressing them by encouraging robust consideration of the interdependencies in evolving approaches to corporate reporting. Originality/value: Our study contributes to the current debate on the future of corporate reporting in light of two significant interconnected crises that threaten business and society – the pandemic and climate change. It provides evidence to support a long-term oriented and holistic approach to risk management and reporting

Importance of Intellectual Capital Information: A Study of Australian Analyst Reports

This study explores the types of intellectual capital (IC) information considered important by analysts. It uses content analysis to examine IC information in 64 initiating coverage reports written on Australian listed companies. Results reveal that analysts consider several types of IC information to be important from a firm valuation perspective, many of which had not previously been examined in capital markets research. It was also found that the relative importance placed on types of IC varies by sector. Information on relational capital and company management wasmost commonly used within analyst reports, whilst information on employees, working environment and structural capital was used least frequently

Intellectual Capital and the Capital Market: A Review and Synthesis

Purpose – The purpose of this paper is to review and synthesise current knowledge on the importance of intellectual capital (IC) information to the capital market. Design/methodology/approach – The paper is by way of literature review. It reviews the empirical research literature from different methodological strands and synthesises the findings to provide evidence on the impact/importance/usefulness of IC from a capital markets perspective. Findings – Importance of IC information has been examined using various research methods including capital markets research, questionnaire surveys, face-to-face interviews, experimentations, verbal protocol analysis and content analysis of analyst reports. These studies provide evidence on the usefulness/importance of many types of IC information. Also, evidence from IC disclosure studies on initial public offering prospectuses sheds light on perceived importance of types of IC information to the capital market. However, there is a scope for more research to refine the current understanding of the importance of IC to the capital market. Practical implications – By reviewing and synthesising the literature, this paper provides an important source of reference for future researchers and policy makers who wish to formulate guidelines for IC reporting to better meet the information needs of capital market actors. It also highlights future research directions. Originality/value – This is the first-published literature review on the importance of IC that provides a comprehensive review of studies adopting various research methods. Prior reviews have been limited to value-relevance and/or predictive ability studies

Reporting on key performance indicators relating to non-financial capitals: Evidence from Sri Lankan integrated report preparers

The International Integrated Reporting () Framework guides companies to consider a broad range of capitals, including non-financial capitals, in the process of value creation and reporting. Companies' approaches to incorporating non-financial capitals into their strategy, decision making, and value creation have received little attention. This chapter examines how integrated report preparers in Sri Lanka use Key Performance Indicators (KPIs) to explain the use and transformation of the non-financial capitals to create value. Three categories of integrated report preparers are identified based on the duration over which integrated reports are prepared. Data was collected from the 2018 company reports. We find that the disclosure of KPIs relating to non-financial capitals increases with companies’ maturity in preparing integrated reports. Nearly half of the integrated report preparers have failed to display the alignment between non-financial capitals, topics material to stakeholders, risk management and company strategy. The formats used to disclose KPIs and periods covered by the KPIs are inconsistent, hindering comparability of company performance on capitals between companies and across periods. Most companies have not set targets in relation to KPIs on non-financial capitals, making performance evaluation difficult. More narrative content and less result-oriented quantitative information is provided on critical non-financial capitals relating to sustainability. The findings raise doubts about companies’ ability to leverage integrated thinking, a fundamental enabler of integrated reporting, and the genuineness of companies’ commitment to sustainability

Accountability and Governance in Pursuit of Sustainable Development Goals: Conceptualising how governments create value

Purpose – Drawing on Adams (2017a) conceptualisation of value creation by organisations published in the Accounting, Auditing and Accountability Journal, the purpose of this paper is to develop a conceptualisation of how national governments can create value for society and the economy through their approach to the UN Sustainable Development Goals (SDGs). Design/methodology/approach – An initial conceptual framework was developed from literature situated at the intersection of accountability, public policy and sustainability/sustainable development. The authors’ review of extant research on national policy development on value creation, sustainability and the SDGs identified gaps in (understanding of) approaches to national accountability and national governance (by state and civil society) processes. The subsequent thematic analysis of 164 written submissions made to the Australian Senate inquiry on the SDGs between December 2017 and March 2018, together with transcripts of five public hearings where 49 individuals and organisations appeared as witnesses during the second half of 2018, focussed on addressing these gaps. Findings – Input to the Australian Senate Inquiry on the SDGs overwhelmingly emphasised the importance of transparency and stakeholder participation in accountability systems, commenting on data gathering, measuring and communicating. There was an emphasis on the need to involve all parts of society, including business, investors and civil society, and for strong central co-ordination by the Office of the Prime Minister and Cabinet. These data allowed the authors to refine the conceptualisation of how national governments can enhance social and economic value through a focus on the UN SDGs and their approach to accounting, accountability and governance. Practical implications – The findings have implications: for national governments in developing approaches to achieve sustainable development; and, for supranational bodies such as the UN in developing agreements, frameworks and guidance for national governments. Originality/value – Building on the extant literature about how global governance should be engaged to improve accountability in achieving the SDGs, the conceptual framework developed through the study shifts focus to national governance and accountability, and provides a blueprint for national governments to create value for the economy and society in the face of global sustainable development issues