Analysis of determinants influencing the level of intelectual capital disclosure: The case of FTSE 100 entities

Abstract

Purpose: The paper deals with the issue of intellectual capital (IC) and its disclosure in the financial statements of FTSE 100 entities. The paper aims to identify the determinants that influence entities to reveal IC related information and also to highlight the theoretical aspects behind such determinants, resulting in comprehensive findings. The results of the analysis can be used to understand what leads entities to make decisions in the field of non-financial disclosure.

Design/methodology/approach: The research part is devoted to the analysis of the relationship between the level of IC disclosures and the analysed determinants – size, profitability and industry. To produce a comprehensive set of results, descriptive statistics are used, followed by regression and correlation analysis. The pooling OLS method is used as it has a higher predictive power than random and fixed effect methods.

Findings: Based on the results of the analysis, it was concluded that the profitability measured as ROA is not a key factor of intellectual capital disclosure in the annual reports of FTSE 100 companies. From the point of view of size measured as total assets, there exists a statistically significant relationship for relational capital, which is generally tied to the company's relationships with customers, vendors, suppliers, and other significant constituents. The analysis also showed significant differences between traditional and service industry in the amount of IC information being reported for all IC categories.

Originality/value: This paper focuses on the determinants influencing the level of IC reporting in a representative sample of entities from the highly active FTSE100 stock market. The paper focuses on three determinants that are frequently reported in existing research. This paper presents statistically based results on the relationships between the determinants and IC, but also between the different parts of IC (human capital, structural capital and relational capital), which provides insights into the structure of reported information on intellectual capital.