* Capital Market Consequences of Voluntary Intellectual Capital Disclosures—Evidence from Germany

• In Event: Voluntary Adoption and Disclosures

Abstract

This paper investigates capital market consequences of voluntary intellectual capital (IC) disclosures for German listed firms. It provides evidence that comprehensive voluntary IC disclosures are significantly related to lower information asymmetry, lower cost of equity capital and higher market values in the German setting. We find disclosures on single categories of IC to be less relevant and the resulting capital market consequences to be less pronounced. IC disclosures are measured by an IC disclosure score based on the framework of the working group on intangibles of the German Schmalenbach Association of Business Administration (SG, 2003). This is the first study to comprehensively analyze the whole spectrum of voluntary IC disclosures and the interplay of the single IC categories, i.e. human, relational and structural capital, when investigating capital market consequences. This paper analyzes annual reports which are important mechanisms for firms to provide information to the public. The study is conducted in Germany as a particularly IC-intensive setting which increases the validity of the tests. The results contribute to literature on IC disclosures and their capital market consequences integrating the interplay of different IC categories. The findings indicate that voluntary disclosures encompassing all dimensions of IC mitigate agency conflicts due to reduced information asymmetries. At the same time, firms benefit from lower cost of equity capital and improved market values. A restricted sample size and potential biases due to self-construction of the disclosure score as well as hand collection of some data are potential limitations.

Authors

• Thomas List, Universität Augsburg

• Christine Miller, University of Augsburg

• Wolfgang Schultze, Universität Augsburg