Editorial

Citation

Chase, R.L. (2007), "Editorial", Journal of Intellectual Capital, Vol. 8 No. 2. https://doi.org/10.1108/jic.2007.25008baa.001

Editorial

One of the most active areas of intellectual capital study is IC measurement and reporting. Research ranges from developing IC frameworks and guidelines to market effectiveness and efficiency in the IC disclosure process. In this Special Issue of the Journal of Intellectual Capital, leading academics and practitioners provide insights into current research and trends in IC assets reporting.

Tomás M. Bañegil Palacios and Ramón Sanguino Galván set the stage for this Special Issue with their paper on “Intangible measurement guidelines: a comparative study in Europe”. The authors compare some of the most recent and significant European research, including results from the MERITUM, DATI and Nordika projects. They conclude that there is still no consensus regarding a conceptual framework for IC reporting – even though there appears to be no significant differences among the published European guidelines.

Waymond Rodgers explores the problems associated with the evolutionary change from an industrial age financial statement reporting system to one based on knowledge assets. He notes that there are three types of validity required for knowledge-based asset reporting systems:

1. 1.

   Criterion validity.

2. 2.

   Content validity.

3. 3.

   Construct validity.

The author presents a knowledge assets measurement model, which addresses problems inherent in current reporting systems.

In their paper “Intellectual capital and capital markets”, Dipankar Ghosh and Anne Wu first examine whether IC information is considered in a firm’s valuation. Next, they study two issues:

1. 1.

   Financial analysts’ investment recommendations when faced with different combinations of performance levels of financial and IC measures.

2. 2.

   The role of financial and IC measures with different levels of performance and time horizon for holding the investments based on the analysts’ investment recommendations.

The authors conclude that after controlling for the effect of financial performances affecting a firm’s value, measures of IC are still significant explanatory variables. They also state that the financial and IC measures affect financial analysts’ investment recommendations differently, depending on the measures’ (i.e. positive and negative) levels of performance and the time horizon for holding the investments.

Validation of frameworks and models is critical in the pursuit of knowledge. John C. Dumay and John A. Tull have explored possible links between IC disclosure and price sensitivity for companies listed on the Australian Stock Exchange. Specifically, they have examined possible relationships between the disclosure of intellectual capital and the cumulative abnormal return of a firm’s share price. The authors report that the disclosure of IC elements in price-sensitive company announcements does have a marginal effect on the cumulative abnormal return of a firm’s share price. More specifically, the market is more responsive to disclosures of internal capital elements. In addition, the disclosure of IC by way of price-sensitive announcements to the stock exchange is another means of communicating with external stakeholders who have an influence on a firm’s share price.

Abdullah Yalama and Metin Coskun have examined the IC performance of quoted banks on the Istanbul Stock Exchange. In this sector analysis the authors measured the IC performance using the efficiency coefficient – Value Added Intellectual Coefficient (VAIC™) – and tested the effect of IC performance on profitability using Data Envelopment Analysis (DEA). In addition, three different portfolios were constructed based on different inputs to observe the effect of intellectual capital on investor’s behavior. The effect of intellectual capital on profitability in the banking sector of the ISE was calculated as 61.3 percent on average, and Portfolio 1, which used the IC measure as an input, yielded the highest returns among the three portfolios constructed.

The paper by Paula Kujansivu and Antti Lönnqvist provides an empirical view of the present state of intellectual capital (IC) in Finnish companies. It also examines the relationship between the concepts value of IC and efficiency of IC. Calculated Intangible Value (CIV), which measures the monetary value of IC, and Value Added Intellectual Coefficient (VAIC™), which describes how a company’s IC adds value to the company, are applied to approximately 20,000 companies during the period 2001-2003. The value and efficiency of IC are described in eleven industries for both small- to medium-sized enterprises and large companies. The relationship between the value and efficiency of IC remains vague even after the empirical analysis. Calculating the value of IC in relative terms by dividing the value of a company’s IC by the value of its tangible assets was found illustrative in comparing different industries.

Some studies have shown that initial public offerings (IPO) prospectuses provide more information on intangibles than traditional financial statements. IPO prospectuses provide information regarding the communicative role and information content concerning intangibles, and competencies of a company. Michela Cordazzo has investigated the intangibles disclosure in Italian IPO prospectuses. Companies have been ranked according to the information provided on intangibles with reference to the frameworks for collection of data proposed by Bukh et al. (2001) and AIAF (2002). The results confirm that intangibles information is increasing in Italian IPOs. The research also examined whether the intangibles disclosure in IPO prospectuses is correlated to some firm-specific variables, which influence the information selected by a company for its admission to the stock exchange. Regression analysis reveals that firm size and pre-IPO managerial ownership are associated to intangibles disclosure, while firm age and level of technology are not related. These results indicate that intangibles disclosure is important in the capital markets assessment of a firm’s value.

Giuseppe A. Busacca and Paolo Maccarrone present a case study of the role played by intangible assets in the determination of the overall economic (and market) value of a firm. Their paper analyzes Telecom Italia to show if (and how) International Financial Reporting Standards (IFRSs) are able to improve the quality of financial reporting information for intangible assets. The results of the analysis show that the use of value-based measures in accounting actually lead to an improvement in the overall quality of information by increasing accuracy and transparency.

Indra Abeysekera highlights the differences in intellectual capital reporting (ICR) practices between developing and developed nations. The author examines the patterns of ICR for large listed firms in Australia and in a developing nation – Sri Lanka. ICR differences were identified between Sri Lankan and Australian firms in the areas of external, human and internal capital. It is argued that that these differences can be attributed to economic, social and political factors. The paper highlights the need for a uniform ICR definition and a reporting framework that provides comparative and consistent reporting under the auspices of a regulatory body.

Matteo Pedrini examines the points of convergence between intellectual capital and corporate responsibility reports, focusing on human capital issues. The paper analyzed the common elements between human capital accounting and the Global Reporting Initiative Guidelines 2002. The study examined which indicators for employees proposed in the GRI guidelines are frequently used in 20 companies considered as best practice in intellectual capital reporting. Results show a large overlapping of indicators around three issues: the description of human capital, the reporting on diversity and opportunity, and the measurement of the quality and intensity of training.

Rory L. Chase