Managing risk with intellectual capital statements

Abstract

If you would like to write for this, or any other Emerald publication, then please use our Emerald for Authors service information about how to choose which publication to write for and submission guidelines are available for all. Please visit www.emeraldinsight.com/authors for more information. About Emerald www.emeraldinsight.comEmerald is a global publisher linking research and practice to the benefit of society. The company manages a portfolio of more than 290 journals and over 2,350 books and book series volumes, as well as providing an extensive range of online products and additional customer resources and services.Emerald is both COUNTER 4 and TRANSFER compliant. The organization is a partner of the Committee on Publication Ethics (COPE) and also works with Portico and the LOCKSS initiative for digital archive preservation. AbstractPurpose -The purpose of this paper is to present an empirical research study which took a novel examination of the relationship between risk and transparency with regards to a company's intellectual capital assets. The objective of this study is to evaluate how the systematic and idiosyncratic risk of publicly traded companies correlates with the degree of available information regarding their intellectual capital statements. Design/methodology/approach -Intellectual capital is measured within the framework of a rating system that includes 44 parameters within eight focus areas. These data were collected from key informants at eight publicly traded IT companies in Sweden. Findings -The results show a negative correlation between idiosyncratic risk and transparency and a positive correlation between market risk and transparency. However, the correlation between risk and transparency may partly be explained by organization size. Research limitations/implications -This study was based on a small set of firms within one country so generalizability is limited. Practical implications -The suggested methodology of intellectual capital measurement has since been used by over 400 organizations across four different continents. Originality/value -This methodology consists of both qualitatively metrics as well as quantitative metrics that are then triangulated together to test various hypotheses.

Intellectual capital and business performance in the pharmaceutical sector of Jordan

“…Stewart (1997) defines intellectual capital as the intellectual material that has been formalized, captured, and leveraged to create wealth by producing a higher-valued asset. Following the work of Edvinsson and Malone (1997), Sveiby (1997), Roos et al (1997), Bontis (1999), O'Donnell et al (2004O'Donnell et al ( , 2006, Sällebrant et al (2007), Curado and Bontis (2007) among others, intellectual capital is defined as encompassing:…”

Does Intellectual Capital Affect the Volatility of Returns? An Empirical Investigation on Italian Listed Companies

“…"Changes in a company's stock price may be partly attributable to a set of macroeconomic variables, such as changes in interest rates, inflation and national productivity, which are common factors because they affect the prices of most stocks in that market. These items are considered market risk components" (Sällebrant et al, 2007(Sällebrant et al, , p. 1472.…”

“…"Changes in stock price may be affected by the firm's success and performance, which include items like new product innovations, cost-cutting efforts, a disastrous fire at a manufacturing plant, or the discovery of an illegal corporate act. These components of return are considered firm-specific or idiosyncratic components because they affect only that firm and not the returns of other investments stocks in the market" (Sällebrant et al, 2007(Sällebrant et al, , p. 1473.…”

“…However, prior literature provides little evidence around the relation between intellectual capital and stock market volatility. Sällebrant et al (2007) conduct a small sample analysis using an adjusted intellectual capital rating based on firm's disclosures. The authors show that disclosure transparency around intellectual capital reduces idiosyncratic risk but increases systematic risk.…”

“…The real concern to investors is the systematic risk, In fact, investors get rewarded for bearing systematic risk. It is not total variance that affects expected returns, but only that part of the variance in returns that cannot be diversified away (Sällebrant et al, 2007).…”