Corporate governance for knowledge production: Theoretical foundations and practical implications

Osterloh, Margit; Frey, Bruno S.

doi:10.22495/cocv3i4c1p2

“…The value relevance of structural capital disclosure, however, is not associated with board structure characteristics. As structural capital comprises mainly of internal sharing knowledge of an organisation, this result confirmsOsterloh and Frey's (2006) argument that the ability of independent directors to improve the value relevance of structural capital might be limited because they do not have sufficient firm-specific knowledge. With regard to the general information such as human and relational capital, consistent with the expectations, board size and independence improve the quality (i.e.…”

supporting

confidence: 79%

“…Therefore, H2b is not supported. According to Osterloh and Frey (2006), only insiders can evaluate firm-specific knowledge generation and transformation. Outsiders, on the other hand, do not have sufficient relevant knowledge.…”

Section: The Level Of Intellectualmentioning

confidence: 99%

See 1 more Smart Citation

Board Structure, Ownership Concentration and Intellectual Capital

Zhang¹

1

0

View full text Add to dashboard Cite

This thesis investigates the influence of board structure and ownership concentration on the level and value relevance of intellectual capital disclosure. This thesis is motivated by the limited post-IFRSs (International Financial Reporting Standards) adoption intellectual capital disclosure studies carried out in a less stringent regulatory environment of New Zealand, and limited research addressing the determinants of the level and value relevance of intellectual capital disclosure. Based on an application of agency theory, cost-benefit theory and value relevance approach, this thesis argues that firm-specific factors are expected to have a significant impact on the level and value relevance of intellectual capital disclosure. Within the agency theory, board structure and ownership concentration mitigate agency costs by enhancing the monitoring function of the board over managers’ opportunistic behaviour, which consequently influence the level of intellectual capital disclosure. In addition, as New Zealand has less tough rules in relation to board structure and ownership concentration, it is expected that these relationships will be more easily identified in the New Zealand context. Second, as most of the intellectual capital disclosure is voluntary, this disclosure is subject to a firm’s cost-benefit analysis. Cost-benefit theory suggests that a firm should not fully disclose its information unless the benefits outweigh the costs of the disclosure. Therefore, the level of intellectual capital disclosure is also influenced by the factors that determine the costs and benefits of the disclosure. Finally, this thesis adopts the value relevance approach to measure the quality of the disclosure. It is expected that the factorsassociated with the level of the disclosure also influence the value relevance of the intellectual capital disclosure. This thesis is based on a sample of 155 firms listed on the New Zealand Exchange covering a total of 519 firm-years over the period between 1 January 2008 and 31 August 2011. A self-developed disclosure index and multiple regression analysis are employed to test the hypothesised relationships. Overall, the results indicate that the average level of intellectual capital disclosed by New Zealand listed firms is low and the human capital component is the most frequently disclosed intellectual capital component. The results provide strong evidence that board structure characteristics, including board size and independence, have a significant positive impact on the level of intellectual capital disclosure. There is strong evidence for a non-linear relationship between ownership concentration and the level of intellectual capital disclosure, which is robust to various types of intellectual capital (i.e. human, relational and structural capital). The results show marginal evidence that board gender diversity has a positive impact on the level of intellectual capital disclosure. In terms of the value relevance of intellectual capital disclosure, only board size has a positive impact on the value relevance of the intellectual capital disclosure. In the individual component analysis, board independence is found to have a significant positive impact on the value relevance of the human and relational capital disclosures. This thesis provides the most recent evidence on the influence of board structure and ownership concentration on the level and value relevance of intellectual capital disclosure in a less stringent regulatory environment of New Zealand. These findings have important implications to regulators, and assist information users in the interpretation of the voluntary intellectual capital disclosure.

show abstract

“…Moreover, the focus shifts from shareholders to the firm as a whole, in line with stewardship theory. A consequence is that director selection becomes paramount and that the chair should be an outsider to the firm (cf., Osterloh and Frey, 2006). As discussed in our theory section, within an OTB individual directors in all likelihood have broader roles and responsibilities than in a TTB.…”

Section: Solutions To the Dilemmasmentioning

confidence: 90%

Supervisory boards in high growth SMEs and mandated board members: two dilemmas

Brand

¹

,

Postma

²

2015

IJBGE

1

0

View full text Add to dashboard Cite

Two dilemmas for boards of growing small and medium-sized enterprises in a two-tier context as a result of their need for external resources (i.e., capital) and the concomitant introduction of external directors (expertise) are discussed in this paper. Firstly, split loyalties can occur when an externally mandated non-executive director may be pressured to act primarily in the interests of his/her mandating firm (e.g., a major investor), which may diminish the incentive to act in the best interest of the focal firm. Secondly, a culture clash is likely when external directors in the much prevalent family-based SME prefer formal control above informal governance which may harm the board's effectiveness. We propose that a one-tier board structure in combination with an effective chairperson is a solution to mitigate both dilemmas.

show abstract

“…Therefore, H2b is not supported. According to Osterloh and Frey (2006), only insiders can evaluate firm-specific knowledge generation and transformation. Outsiders, on the other hand, do not have sufficient relevant knowledge.…”

Section: The Level Of Intellectualmentioning

confidence: 99%

Board Structure, Ownership Concentration and Intellectual Capital

Zhang¹

1

0

View full text Add to dashboard Cite

This thesis investigates the influence of board structure and ownership concentration on the level and value relevance of intellectual capital disclosure. This thesis is motivated by the limited post-IFRSs (International Financial Reporting Standards) adoption intellectual capital disclosure studies carried out in a less stringent regulatory environment of New Zealand, and limited research addressing the determinants of the level and value relevance of intellectual capital disclosure. Based on an application of agency theory, cost-benefit theory and value relevance approach, this thesis argues that firm-specific factors are expected to have a significant impact on the level and value relevance of intellectual capital disclosure. Within the agency theory, board structure and ownership concentration mitigate agency costs by enhancing the monitoring function of the board over managers’ opportunistic behaviour, which consequently influence the level of intellectual capital disclosure. In addition, as New Zealand has less tough rules in relation to board structure and ownership concentration, it is expected that these relationships will be more easily identified in the New Zealand context. Second, as most of the intellectual capital disclosure is voluntary, this disclosure is subject to a firm’s cost-benefit analysis. Cost-benefit theory suggests that a firm should not fully disclose its information unless the benefits outweigh the costs of the disclosure. Therefore, the level of intellectual capital disclosure is also influenced by the factors that determine the costs and benefits of the disclosure. Finally, this thesis adopts the value relevance approach to measure the quality of the disclosure. It is expected that the factorsassociated with the level of the disclosure also influence the value relevance of the intellectual capital disclosure. This thesis is based on a sample of 155 firms listed on the New Zealand Exchange covering a total of 519 firm-years over the period between 1 January 2008 and 31 August 2011. A self-developed disclosure index and multiple regression analysis are employed to test the hypothesised relationships. Overall, the results indicate that the average level of intellectual capital disclosed by New Zealand listed firms is low and the human capital component is the most frequently disclosed intellectual capital component. The results provide strong evidence that board structure characteristics, including board size and independence, have a significant positive impact on the level of intellectual capital disclosure. There is strong evidence for a non-linear relationship between ownership concentration and the level of intellectual capital disclosure, which is robust to various types of intellectual capital (i.e. human, relational and structural capital). The results show marginal evidence that board gender diversity has a positive impact on the level of intellectual capital disclosure. In terms of the value relevance of intellectual capital disclosure, only board size has a positive impact on the value relevance of the intellectual capital disclosure. In the individual component analysis, board independence is found to have a significant positive impact on the value relevance of the human and relational capital disclosures. This thesis provides the most recent evidence on the influence of board structure and ownership concentration on the level and value relevance of intellectual capital disclosure in a less stringent regulatory environment of New Zealand. These findings have important implications to regulators, and assist information users in the interpretation of the voluntary intellectual capital disclosure.

show abstract

Corporate governance for knowledge production: Theoretical foundations and practical implications

Cited by 6 publications

References 66 publications

Board Structure, Ownership Concentration and Intellectual Capital

Board Structure, Ownership Concentration and Intellectual Capital

Supervisory boards in high growth SMEs and mandated board members: two dilemmas

Board Structure, Ownership Concentration and Intellectual Capital

Contact Info

Product

Resources

About