Managerial ability and intellectual capital disclosure

Abstract

PurposeWhile prior research in the area of intellectual capital (IC) disclosure has mainly focused on firm, board and audit committee characteristics, there is little research on whether managerial characteristics are associated with IC disclosure. This study aims to examine the relationship between managerial ability (MA) and the extent of IC disclosure.Design/methodology/approachThe study sample comprises 1,098 firm-year observations of Iranian listed firms during 2012–2017. This study uses the checklist developed by Li et al. (2008) and adopts a content analysis approach and calculates the IC disclosure index in 62 dimensions within three categories: human capital, structural capital and relational capital. To measure MA, this study uses the managerial ability score (MA-Score) developed by Demerjian et al. (2012) for Iranian firms.FindingsThe results show that MA is significantly and negatively associated with the overall extent of IC disclosure and all the three components of IC (human capital, structural capital and relational capital). Further analysis shows that the interaction between MA and firm performance is positive and significant, suggesting that the negative relationship between MA and IC disclosure is less pronounced for high-performing firms. This study addresses the potential endogeneity issue by using the propensity score matching approach. The findings are also robust to the alternative measure of MA.Originality/valueThis study contributes to both the MA literature and the IC disclosure literature. To the best of the authors' knowledge, this study is the first to provide empirical evidence on the relationship between MA and IC disclosure.

Does corporate governance moderate the relationship between intellectual capital and firm's performance?

“…Intellectual capital significantly impacts corporate sustainability claims (Bananuka et al, 2022) and is negatively affected by the proportion of independent members on the board of directors Mooneeapen et al, 2022). Rajabalizadeh and Oradi (2022) assert that managerial ability has a negative and significant effect on intellectual capital. In addition, the authors argue that the negative relationship between management ability and intellectual capital is less evident for high‐performing firms.…”

The Impact of The Relationship Between Managerial Ability and Earnings Management by Classification Shifting on Transparency of Financial Reporting and Firm Value: An Empirical Evidence from The Saudi Capital Market

“…For instance, Baik et al, (2018) verified a positive and significant relationship between the MA and the quality of the information environment. Rajabalizadeh and Javad (2022) conclude that there is a positive relationship between the MA and the extent of disclosure of intellectual capital. The third group consists of studies that investigated the influence of MA on the value of the firm.…”

“…Also, some studies have examined the relationship between the MA and disclosure of specific accounting information. For example, Rajabalizadeh and Javad (2022) show that MA is significantly and negatively associated with the scope of intellectual capital disclosure. Daradkeh et al, (2022) have documented that highly qualified managers tend to disclose more information on climate change.…”

“…Managers who have the ability to efficiently manage and design business processes make appropriate decisions to maximize the value of the business (Wiratama and Sum,2021). Preceding studies reported that MA plays an essential role in rising firm value ( Rajabalizadeh and Javad ,2022;Rossi et al, 2021;Wiratama and Sum ,2021 ;Bhutta et al,2021;Gong et al ,2020;Chuah and Foong ,2019;Petkevich and Andrew, 2018). In other words, highly skilled managers are more valued and play an important role in firm policies that manage resources more efficiently and maximize firm performance.…”

“…The third group consists of studies that investigated the influence of MA on the value of the firm. These studies have shown that highly skillful managers are more valued and play an important role in firm policies that manage resources more efficiently and maximize firm value (Rajabalizadeh and Javad ,2022;Wiratama and Sum ,2021;Bhutta et al,2021;Gong et al ,2020;Chuah and Foong ,2019). In contrast, Demerjian et al, (2020) found that firm value was unaffected by MA.…”