J-L. W. Mitchell Van der Zahn

Determinants of intellectual capital disclosure in prospectuses of initial public offerings

Abstract Intellectual capital is recognised as the new economic era’s pivotal factor underlying value creation. Deficient and inconsistent intellectual capital reporting is escalating information asymmetry between informed and uninformed investors. This provides fertile ground for informed investors to extract higher abnormal returns and higher wealth transfers from uninformed investors, particularly during a firm’s initial public offering (IPO). This study investigates the association between intellectual capital disclosure levels in prospectuses of 444 IPOs listing on the Singapore Stock Exchange between 1997 and 2006, and three potential explanatory determinants: (1) ownership retention; (2) proprietary costs; and (3) corporate governance structure. Statistical analysis supports our conjecture of a positive association between intellectual capital disclosure and ownership retention. We also find, consistent with expectations, a negative influence of proprietary costs on the positive intellectual capital disclosure – ownership retention association. However, contrary to predictions, we do not find an IPO’s corporate governance structure significantly influences the negative interaction of proprietary costs on the ownership retention – proprietary cost association. Our findings have implications for various parties such as regulators who may impose unnecessary costs on issuers if they introduce mandatory disclosures whilst lacking an understanding of the factors influencing intellectual capital disclosures.

Is communicating intellectual capital information via the internet viable

Purpose – The first objective of this study is to examine the nature and extent of intellectual capital (IC) information Australian hospitals disclose to their stakeholders (patients, general public, healthcare professionals) via the internet. The second objective is to examine whether four hospital characteristics influence the disclosure of IC‐related information.Design/methodology/approach – Analysis reported in this study is based on IC disclosures by 128 hospitals on their internet web sites. IC disclosure is measured using an 85‐item research constructed index that covers six major sub‐categories. Measurement of IC disclosure was conducted during a four month period in the last third of 2005.Findings – It is found that whilst the incidence rate of hospitals disclosing IC information is high, the extent of IC disclosure is relatively low. The quantity of IC disclosure varied significantly between different IC sub‐categories. In addition, the paper investigates possible determinants of variations in I...

Is there an association between intellectual capital disclosure, underpricing and long-run performance?

Purpose – Excessive initial trading day returns (termed underpricing (UP)) and poor long‐run performance (LRP) are two well‐documented anomalies associated with initial public offerings (IPOs).The primary objective of this study is to empirically test the association between the extent of intellectual capital (IC) disclosure in the prospectus of an unseasoned IPO and: UP and LRP.Design/methodology/approach – Ex ante uncertainty surrounding IC – recognized as the pivotal resource underlying a firms future value creation and sustainable competitive advantage in the “new economic” era – is likely to be high. Unseasoned IPOs world‐wide are increasing with many IPOs heavily IC‐reliant. Given ex ante uncertainty surrounding IC, there is an escalating need to understand how disclosure of information related to IC can reduce an IPOs cost of capital (i.e. UP) and provide an indication of LRP. The analysis is based on a sample of 228 Singapore IPOs listing during the period 1997‐2003. IC disclosure (ICDisc) in IP...

Association between independent audit committee members' human-resource features and underpricing: the case of Singapore IPOs from 1997-2006

Purpose – The primary objective of this paper is to examine the association between the seven human‐resource features (spanning three major themes: qualifications and credentials; business and initial public offering (IPO) launch experience; and diversity) of independent audit committee members and the level of underpricing.Design/methodology/approach – A sample of 410 Singapore IPOs listing on the stock exchange of Singapore from January 1, 1997 to December 31, 2006 was used.Findings – Empirical results overall suggest no overwhelming association between the human‐resource features of IPO audit committees and underpricing. Rather, the findings suggest only some specific human‐resource features (e.g. presence of an independent audit committee member with accounting qualifications and credentials) are of significance. Others (e.g. gender diversity of independent audit committee members) have little or no association. Also, results do not suggest a major category of human‐resource features (i.e. qualificati...

Intellectual capital prospectus disclosure and post-issue stock performance

Purpose – The primary purpose of this paper is to investigate the association between intellectual capital disclosures in initial public offerings (IPOs) and post‐issue stock performance.Design/methodology/approach – The analysis is based on a sample of 259 IPOs listing on the Singapore Stock Exchange (SGX) between July 1, 1999 and June 30, 2005. Post‐issue stock performance is measured using market‐adjusted buy‐and‐hold returns across a 500 trading day observation window after listing. Intellectual capital disclosure is measured using an 81‐item index.Findings – The studys major finding is a negative association between the level of intellectual capital disclosure in IPO prospectuses and post‐issue stock performance. The negative association persists regardless of industry type but is stronger for small IPOs relative to larger counterparts.Research limitations/implications – The study includes only Singapore IPOs within a specific timeframe concentrating on a single disclosure mechanism. Furthermore, th...

Intellectual capital disclosures and the association with first-day returns in initial public offerings

This study examines the association between first-day returns and intellectual capital (IC) disclosure. Due to valuation difficulties, lower regulatory disclosure control and intangible properties underlying IC, we propose in the absence of sufficient disclosure ex ante uncertainty surrounding IC resources is high. Thus, we hypothesise that as IC disclosure in an initial public offering (IPO) prospectus declines, the extent of first-day returns increases. Contrary to expectations we find, based on data from a sample of 334 Singapore IPOs from 1997 to 2004 and after controlling for other signalling mechanisms, a positive association between IC disclosure and first-day returns. Additional analysis finds the positive IC disclosure/first-day return association persists across key demographic features. An array of sensitivity tests provides further support for the robustness of our main findings. Overall, our findings suggest that issuers in the Singapore IPO market may use IC disclosures as a strategic tool to complement first-day returns.