Subhash Abhayawansa

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 disclosure from sell‐side analyst perspective

Purpose – Research on the use/disclosure of intellectual capital (IC) information by sell‐side analysts, using content analysis of their reports, is growing. This paper aims to establish the importance of this perspective in understanding the role of IC in communicating firm value, to introduce possible theoretical frameworks to interpret the findings of such studies, and to propose methodological developments.Design/methodology/approach – The paper argues for the need to look at IC from the perspective of sell‐side analysts, and then advocates the use of several theoretical frameworks to enrich current understanding of the role of IC as it is used/disclosed by sell‐side analysts. Current methodologies used in this type of research are critiqued with a view to proposing multiple research methods.Findings – Looking at IC from the sell‐side analyst perspective helps us to understand how the capital market appreciates this information. However, IC information that analysts disclose cannot be taken at its fac...

Integrated reporting in South Africa: some initial evidence

Purpose – This study aims to examine whether the integrated reports prepared in accordance with the King III Code of corporate governance regulation are providing the information intended of an integrated report, i.e. to communicate the “ability of an organisation to create and sustain value”. Second, it explains the behaviour of companies listed on the Johannesburg Stock Exchange (JSE) when responding to the regulation to publish an integrated report. The King III Code of corporate governance requires companies listed on the JSE to prepare annually an integrated report or provide reasons for not doing so. Design/methodology/approach – This paper uses legitimacy theory to formulate two alternative propositions on how JSE-listed companies may disclose information relating to a number of capitals, as described by the International Integrated Reporting Committee, in response to the King III Code. Annual/integrated reports of the top 25 JSE listed companies for the years 2009/2010 and 2011/2012 are content-analysed for the presence of information on capitals. The change in the extent of disclosure of capitals is analysed using t-tests to test the propositions. Findings – The results show that the introduction of integrated reporting in South Africa has resulted in an increase in the extent of disclosure of human, social and relational, natural and intellectual capital information of the listed companies. The increment in the disclosure of social and relational capital is statistically significantly greater than the increment in the disclosure of other capitals. The findings indicate that JSE-listed companies are adopting a legitimation strategy based on symbolic management when preparing integrated reports. Practical implications – This study sheds light on the relevance of regulating corporate reporting within a setting where companies are already voluntarily reporting on social, environmental, human, intellectual and natural capital information. Findings have implications for policymakers who have mandated or considering mandating integrated reporting. To the South African policymakers, in particular, this study highlights the need for incorporating, within the listing rules, minimum requirements in relation to the nature and content of an integrated report. Originality/value – This paper provides the first initial evidence on the impact of the introduction of integrated reporting regulation, followed by limited guidance to preparers, on the nature and extent of disclosure of capitals. This study extends the work of Solomon and Maroun (2012) by explaining disclosure practices of South African-listed companies in relation to information on relational, human and intellectual capital.

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 ...

Conceptions of Learning and Approaches to Learning—A Phenomenographic Study of a Group of Overseas Accounting Students from Sri Lanka

This study explores conceptions of learning (SCL) and approaches to learning (SAL) of a group of Sri Lankan students studying accounting in an Australian university. The focus is on how cultural background and home country learning experiences shape SCL and SAL of these students. This research is based on the phenomenographic method, and semi-structured interviews are used for data collection. The results indicate that the interviewed students have lower-order conceptions of learning, and show characteristics of surface learning. Although the social approval motive was dominant in these students, it was not manifested in an achieving approach. Students in this study embrace the pedagogical tradition of the West, and engage in deep learning when they are exposed to research or practice-based assessments. Remnants from years of secondary education and aspects of a collectivist culture play a vital part in the ways in which these students perceive and approach learning. In addition, preconceptions of accounting as a vocation and a discipline strongly embedded in practice, drive learning conceptions and learning approaches.

Intellectual capital information and stock recommendations: impression management?

Purpose – 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 – Content analysis is used to investigate ICI in the full text of sell‐side analysts’ 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 – 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 r...

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...

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 imp...

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 managements 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 studys 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.

Determinants of carbon management strategy adoption: Evidence from Australia’s top 200 publicly listed firms

Purpose - – The purpose of this longitudinal study is to examine the determinants of carbon management strategy (CMS) adoption among Australia’s top 200 listed firms. Design/methodology/approach - – A legitimacy theory framework is adopted to investigate whether any significant relationship exists between a firm’s decision to adopt CMS and internal organisational factors, such as the presence of an environmental management system (EMS), as well as corporate governance factors like having an environmental committee, board size and board independence. Content analysis of Carbon Disclosure Project data and other publicly available information sourced from firm websites, annual reports and stand-alone sustainability reports is conducted, covering the period from 2008 to 2012. Findings - – Logistic regression analyses confirm that firms adopting CMS are more likely to have an EMS, an environmental committee, larger board size and greater board independence. The study also finds significant association between CMS adoption, firm size, leverage and environmental sensitivity of the firm’s industry. Originality/value - – The study shows that internal organisational factors and corporate governance attributes play a vital role in maintaining organisational legitimacy through CMS adoption. The findings of this study should be of interest to report providers (i.e. reporting firms), report users (such as investors and consumers) and policymakers.