Conceptualisation of intellectual capital in analysts’ narratives: a performative view

Purpose: This study tests the performativity of Intellectual Capital (IC) from the perspective of sell-side analysts, a type of actor who consumes and creates IC information and in whose practice IC information plays a significant role. Design/methodology/approach: The empirical component of the study comprises a narrative analysis of the text of a large corpus of sell-side analysts’ initiation coverage reports. We adopt Mouritsen’s (2006) performative and ostensive conceptualisations of IC as our theoretical framework. Findings: We find that the identities and properties of IC elements are variable, dynamic and transformative. The relevance of IC elements in the eyes of analysts is conditional on the context, temporally contingent and bestowed indirectly. IC elements are attributed to firm value both directly, in a linear manner, and indirectly, via various non-linear interrelationships established with other IC elements, tangible capital and financial capital. Research limitations/implications: This study challenges the conventional IC research paradigm and contributes towards a performativity-inspired conceptualisation of IC and a resultant situated model of IC in place of a predictive model. Originality/value: This is the first study to apply a performative lens to study IC identities, roles and relationships from the perspective of a field of practice that is external to the organisation where IC is hosted. Examining IC from analysts’ perspective is important because not only can it provide an alternative perspective of IC, it also enables an understanding of analysts’ field of practice

The use of intellectual capital information by sell-side analysts in company valuation

This paper investigates the role of intellectual capital information (ICI) in sell-side analysts’ fundamental analysis and valuation of companies. Using in-depth semi-structured interviews, it penetrates the black box of analysts’ valuation decision-making by identifying and conceptualising the mechanisms and rationales by which ICI is integrated within their valuation decision processes. We find that capital market participants are not ambivalent to ICI, and ICI is used: (1) to form analysts’ perceptions of the overall quality, strengths and future prospects of companies; (2) in deriving valuation model inputs; (3) in setting price targets and making investment recommendations; and (4) as an important and integral element in analyst–client communications. We show that: there is a ‘pecking order’ of mechanisms for incorporating ICI in valuations, based on quantifiability; IC valuation is grounded in valuation theory; there are designated entry points in the valuation process for ICI; and a number of factors affect analysts’ ICI use in valuation. We also identify a need to redefine ‘value-relevant’ ICI to include non-price-sensitive information; acknowledge the boundedness and contextuality of analysts’ rationality and motives of their ICI use; and the important role of analyst–client meetings for ICI communication

[Editorial] Intellectual capital accounting in the age of integrated reporting: a commentary

Purpose – The purpose of this paper is to explore the extent to which the practice of integrated reporting (IR) in organisations can be a vehicle for furthering and sustaining the practice of accounting for intellectual capital (IC). It introduces the eight papers forming this Journal’s special issue on “Extending Intellectual Capital through Integrated Reporting” that demonstrate how organisations are developing practices at the nexus of IC and IR. Design/methodology/approach – The paper takes the form of a review of the eight papers, and it connects the outcomes from these papers into some future research directions based on an interpretive approach and the authors’ expertise on IC and IR. Findings – The papers published in this special issue provide a useful foundation for extending the research project on IR-led IC accounting. However, there is a lack of research in this special issue that goes much beyond third-stage IC research, which is directed at strengthening IC practices inside organisational boundaries. Research limitations/implications – This commentary highlights that IR provides many opportunities to reinvigorate the field of IC accounting. Insights provided in this commentary may be relevant to understand and evaluate future iterations of IC accounting. Practical implications – While it is essential to understand how IR works in practice moving beyond organisational boundaries it is even more critical if companies are to survive and thrive in an increasingly turbulent business operating environment. Thus, this commentary offers arguments as to how IC and IR research can extend into fourth and fifth stage research paradigms. Originality/value – This commentary places the eight papers published in the Journal’s special issue on “Extending Intellectual Capital through Integrated Reporting” within the context of IC accounting to explain the trajectory of research that connects IC and IR and reveals gaps in this field of research

A methodology for investigating intellectual capital information in analyst reports

Purpose: The purpose of this paper is to describe a methodology that enables the generation of valid and reliable inferences on what and how intellectual capital (IC) information is communicated by sell-side analysts in their research reports. Design/methodology/approach: The method described in this paper involves content-analysing initiating coverage analyst reports using a four-dimensional IC coding framework and a detailed coding instrument, which is founded in the literature and indigenous to analyst reports. The paper explicates methodological decisions associated with content analysis: selecting the appropriate sampling unit; recording unit and measurement unit; developing the categorisation scheme and coding instrument; the need for test coding; the approach to data collection; and assessment of reliability and validity. Findings: The methodology described is applied to a sample of analyst reports to illustrate inferences that can be drawn on what and how IC information is communicated in analyst reports. Practical implications: Various practical issues arising in the application of content analysis method are discussed and a methodology for investigating IC communications by sell-side analysts is described in this paper. This knowledge can be useful to future researchers conducting content-analytic studies involving analyst reports in general, and IC communications in analyst reports in particular. Originality/value: This paper extends the methodology developed previously to examine IC information in analyst reports. Although inspired and heavily influenced by these works, the methodology presented in this paper differs from theirs on several fronts. The paper introduces an alternative methodological paradigm to the study of analyst reports by emphasising them as a communication medium through which sell-side analysts may pursue an agenda of their own. This is contrasted with the view held by several prior researchers that analyst reports just provide a record of analysts' thought processes

Milestones in the development of intellectual capital reporting

This paper reviews the accounting and management literatures relating to intellectual capital. It identifies and discusses the major milestones in the intellectual capital (IC) reporting movement and significant contributions promoting external reporting of IC. It was identified that with a view to enabling organisations provide a clear understanding of firm value creation several national and supranational institutions have produced guidelines and frameworks for externally reporting IC. In many cases regulators, the accounting profession and accounting scholars have driven these initiatives. Although IC reporting has been identified as an important aspect of reporting not only in large corporates but also in small and medium enterprises and in the not-for-profit sector the existing guidelines for reporting of IC have not been embraced by organisations. Possible future directions for IC reporting are proposed

An overview of corporate governance regulations in Sri Lanka

Abstract not available

A review of guidelines and frameworks on external reporting of intellectual capital

Purpose: With a view to enabling organisations provide a clear understanding of firm value creation, several national and supranational institutions have produced guidelines and frameworks for externally reporting intellectual capital (IC). In many cases regulators, the accounting profession and accounting scholars have driven these initiatives. The purpose of this paper is to summarise, analyse and compare the guidelines and frameworks that have been developed with a focus on externally reporting IC. Design/methodology/approach: The paper analyses the assumptions underpinning 20 guidelines and frameworks that have been developed with a focus on reporting IC using a self-constructed framework. Findings: The review resulted in a comparison of IC reporting guidelines and framework based on target audience, role of IC within the organisational strategic management process and reporting IC indicator. It provides an understanding of the state of the art in relation to external reporting of IC. Practical implications: The insights provided by the comparison of the guidelines and frameworks are likely to be helpful for practitioners wanting to adopt or develop an IC reporting model for their organisation. Policy-makers will find these insights beneficial when attempting to refine existing frameworks and guidelines for reporting IC and in developing new ones to suit various circumstances. Also, this paper provides a useful review for academics. Originality/value: This is the first paper to provide a review of a large number of business reporting guidelines and frameworks with a focus on IC. It is a valuable reference for practitioners, policy-makers and academics on IC reporting models

Corporate reporting of intellectual capital: evidence from the Bangladeshi pharmaceutical sector

Purpose - The purpose of this paper is to provide an understanding of the intellectual capital (IC) reporting practices of the Bangladeshi pharmaceutical industry, one of the most significant industries to the Bangladeshi economy. It investigates the extent and qualitative characteristics of IC disclosures made by listed pharmaceutical companies in Bangladesh. Design/methodology/approach - Data are gathered through a content analysis of the 2006 annual reports of 16 pharmaceutical companies quoted on the Dhaka Stock Exchange. The content analysis is performed by IC topic (i.e. categories and subcategories) and three semantic properties of IC disclosure: first, format (i.e. discursive, numerical but non-monetary, numerical-monetary and visual); second, news-tenor (i.e. positive, neutral and negative); and three, time-orientation (i.e. forward-looking, non-time-specific and past-oriented). Findings - Results suggest a clear awareness among the Bangladeshi pharmaceutical companies of the significance of IC in corporate value creation and a commitment to publicly communicating IC. Some evidence is found of the need to manage stakeholder relationships, and legitimacy and impression management motives underpinning the management's desire to disclose IC. Also, proprietary cost theory explains the variation in the disclosure of types of IC. The Bangladeshi pharmaceutical companies did not adopt a consistent framework for IC reporting. A lack of consistency in reporting IC was also evident as the extent and subcategories of IC disclosures varied among companies. The findings indicate the Bangladeshi pharmaceutical companies may not have properly measured and managed their IC. Research limitations/implications - There are two main limitations specific to this study. First, it only provides a snapshot of IC disclosure practices of Bangladeshi pharmaceutical companies in 2006. Changes may have taken place since then that would have affected the IC-intensity and IC utilisation of these entities. Second, the study's sample is limited due to its focus on one industry. However, it is representative of the population as it includes more than two-thirds of Bangladeshi pharmaceutical companies. This limitation affects the ability to conduct statistically meaningful analyses for testing any hypotheses relating to IC disclosure. Originality/value - This is the first study on IC reporting practices of Bangladeshi pharmaceutical companies. Unlike most prior studies on IC disclosure practices, this study measures the quality of disclosures by analysing their semantic properties. The paper highlights the need for building organisational competencies in managing, measuring and reporting IC in Bangladesh

Intellectual capital disclosure: literature review of supply-side and demand-side

A body of literature has emerged on intellectual capital disclosure (ICD) over the past decade. This paper examines the development of ICD literature to provide a summary of our current knowledge, synthesise and compare findings from different studies, and suggest some directions for future research. ICD is viewed here from supply-side being corporate management supplying information and demand-side being the users demanding corporate information, namely sell-side analysts. The paper begins by reviewing the ICD literature and critically examines the common themes in the literature, research methodologies and theoretical perspectives. It then compares and synthesises research findings of ICD literature providing diverse analogies from both positivist and critical angles. The paper concludes by arguing for broadening the research base of supply-side and demand-side ICD research and offers suggestions for doing so. The paper identifies similarities and differences in supplying ICD of different countries in annual reports, IPO prospectus, management presentations to analysts and demanding ICD to produce sell-side analyst reports