Investment in Employees and Research and Development and the Signalling of Intellectual Capital by UK Listed Companies

Abstract

This paper examines the cross-sectional effect of investment in employees and investment in research and development on the extent of voluntary disclosure of intellectual capital of 443 FTSE All Share Index companies for the year 2003/2004. The extent of disclosure is measured by a disclosure index based on intellectual capital attributes included in the narratives and illustrations of the annual reports. The paper predicts that agency costs may be minimised through voluntary disclosure. In addition, that in some industries, the benefits of signalling valuable, rare, inimitable and non-substitutable attributes may outweigh the competitive costs of reporting this information. The results suggest that large companies operating in non-manufacturing, high-tech and innovative industries that are characterised by investment in employees and research and development processes have higher levels of hidden value; these companies are associated with the signalling of intellectual capital.

Pengaruh Intensitas R&D, Tipe Industri, Leverage, dan Profitabilitas Terhadap Intellectual Capital Disclosure

“…Guthrie & Petty dalam Ulum (2015) mengungkapkan bahwa intellectual capital disclosure berpotensi sebagai sarana bagi perusahaan untuk menunjukkan keunggulan mereka secara efektif. Mkumbuzi (2015) mendefinisikan research & development sebagai semua biaya, baik langsung maupun tidak langsung, yang terkait dengan penciptaan serta pengembangan proses, teknik, aplikasi, dan produk baru dengan kemungkinan komersial. Berdasarkan resource-based theory, investasi research & development mengubah pengetahuan dan keterampilan menjadi proses yang unik yang kemudian menjadi dasar keunggulan kompetitif (Nadeem et al, 2019).…”

Determinants of Intellectual Capital Performance in Indonesian Manufacturing Companies

“…The manufacturing sector has the potential to have human resources that can produce good intellectual capital performance; this is because manufacturing sector companies need to utilize their human resources to provide innovation and technology development for the performance and products produced for the company, even though the more service companies rely on intangible assets compared to manufacturing companies who rely more on tangible assets [7]. Intellectual capital began to be developed in Indonesia after the existence of PSAK 19 (Revised 2015) that describes intangible assets.…”