Abstract
This exploratory study examines the voluntary reporting practices of intellectual capital by leading European banks. Its contribution is twofold: first, it investigates a sector that has been overlooked despite its dominant role in economies and second, it responds to the call for longitudinal analyses in the field of intellectual capital reporting. The empirical analysis is conducted over a nine-year period (2001–2009), prior and after the implementation of the market discipline pillar of Basel II, which is argued to potentially affect the level of IC disclosure. Content analysis is applied using a widely used framework, slightly modified to take into consideration the peculiarities of the sector, including the knowledge intensive aspect. The sample consists of annual and dedicated reports of five universal banks headquartered in Europe. Findings indicate that this reporting occurs primarily in a narrative form, and is seldom factual and verifiable. Forward-looking information is extremely rare, as well as quantified information. In relative terms, relational capital is the most reported category, followed by human and structural capital. Over the period, a strong upward trend is observed for structural capital, suggesting an increased awareness of the importance of strong management processes and corporate culture. Disclosure levels of human and relational capital are relatively high and also increase, though to a lower extent, during the covered period. Findings also suggest that banks are engaged in a virtuous cycle of increasingly reporting intellectual capital.
Similar content being viewed by others
References
Abeysekera, I., & Guthrie, J. (2005). An empirical investigation of annual reporting trends of intellectual capital in Sri Lanka. Critical Perspectives in Accounting, 16(3), 151–163.
Abeysekera, I. (2008). Intellectual capital disclosure trends: Singapore and Sri Lanka. Journal of Intellectual Capital, 9(4), 723–737.
Abdolmohammadi, M. (2005). Intellectual capital disclosure and market capitalization. Journal of Intellectual Capital, 6(3), 397–416.
Alvesson, M. (2000). Social identity and the problem of loyalty in knowledge-intensive companies. Journal of Management Studies, 37(8), 1101–1123.
April, K. A., Bosma, P., & Deglon, D. A. (2003). IC measurement and reporting: establishing practice in SA mining. Journal of Intellectual Capital, 4(2), 165–180.
Baiman, S., & Verrecchia, R. E. (1996). The relation among capital markets, financial disclosure, production efficiency, and insider trading. Journal of Accounting Research, 34(1), 1–22.
Barney, J. B. (1991). Firm resources and sustained competitive advantage. Journal of Management, 17(1), 99–120.
Basel Committee on Banking Supervision (2004). International convergence of Capital Measurement and Capital Standards: a revised framework.
Basel Committee on Banking Supervision (2006). International convergence of Capital Measurement and Capital Standards: a revised framework—comprehensive version.
Beattie, V., McInnes, W., & Fearnley, S. (2004). A methodology for analysing and evaluating narratives in annual reports: a comprehensive descriptive profile and metrics for disclosure. quality attributes. Accounting Forum, 28(3), 205–236.
Beattie, V., & Thomson, S. J. (2007). Lifting the lid on the use of content analysis to investigate intellectual capital disclosures. Accounting Forum, 31, 129–163.
Beattie, V., & Thomson, S. (2010). Intellectual and capital reporting: academic utopia or corporate reality in a brave new world, ICAS, Edinburgh.
Bontis, N. (2003). Intellectual capital disclosure in Canadian corporations. Journal of Human Resource Costing and Accounting, 7(1–2), 9–20.
Botosan, C. A. (1997). Disclosure level and the cost of equity capital. The Accounting Review, 72(3), 323–349.
Bozzolan, S., Favotto, F., & Ricceri, F. (2003). Italian annual intellectual capital disclosure—an empirical analysis. Journal of Intellectual Capital, 4(4), 543–558.
Bozzolan, S., O’Regan, P., & Ricceri, F. (2006). Intellectual capital disclosure: a comparison of Italy and the UK. Journal of Human Resources Costing and Accounting, 10(2), 92–113.
Branco-Castelo, M., & Rodriguez-Lima, L. (2006). Corporate social responsibility and resource-based perspectives. Journal of Business Ethics, 69(2), 111–132.
Brennan, N. (2001). Reporting Intellectual Capital in annual reports: evidence from Ireland. Accounting, Auditing and Accountability Journal, 14(4), 423–436.
Brooking, A. (1996). Intellectual capital: core asset for the third millennium enterprise. London: International Thomson Business Press.
Brüggen, A., Vergauwen, P., & Dao, M. (2009). Determinants of intellectual capital disclosure: evidence from Australia. Management Decision, 47(2), 233–245.
Bukh, P. N., Nielsen, C., Gormsen, P., & Mouritsen, J. (2005). Disclosure information on intellectual capital in Danish IPO prospectus. Accounting, Auditing and Accountability Journal, 18(6), 713–732.
Cabrita, M., & Bontis, N. (2008). Intellectual capital and business performance in the Portuguese banking industry. International Journal of Technology Management, 43(1–3), 212–237.
Campbell, D., & Abdul Rahman, M.R. (2010). A longitudinal examination of intellectual capital reporting in Marks & Spencer annual reports, 1978–2008. The British Accounting Review, 42, 56–70.
Cooper, D. R., & Schindler, P. S. (2011). Business research methods (11th ed.). New York: McGraw-Hill International.
Cordazzo, M. (2007). Intangibles and Italian IPO prospectuses: a disclosure analysis. Journal of Intellectual Capital, 8(2), 288–305.
Danish Ministry of Science, Technology and Innovation (2003). Intellectual Capital Statements—the New Guideline, Danish Ministry of Science, Technology and Innovation, Copenhagen.
Dobler, M. (2006). Risk reporting—a German perspective based on a review of disclosure models. In Zéghal, D. & Lajili, K. (Eds.), Enterprise risk management: rethinking risk in the 21st Century (pp. 7–37). Ottawa.
Eccles, R. G., & Krzus, M. P. (2010). One report. Integrated reporting for a sustainable strategy. Hoboken: John Wiley & Sons.
Edvinsson, L., & Malone, M. S. (1997). Intellectual capital: realizing your company’s true value by finding its hidden roots. New York.
Elliot, R. K., & Jacobson, P. D. (1994). Costs and benefits of business information disclosure. Accounting Horizons, 8(4), 80–96.
Eurostat (2005). Statistics in focus, science and technology, 4/2005, R&D Statistics, Luxembourg.
Fasnacht, D. (2009). Open innovation in financial services: growing through openness, flexibility, and customer integration. Berlin: Springer.
Francis, J. R., Khurana, I. K., & Pereira, R. (2005). Disclosure incentives and effects on cost of capital. The Accounting Review, 80(4), 1125–1162.
García-Meca, E., & Martínez, I. (2007). The use of intellectual capital information in investment decisions: an empirical study using analyst reports. The International Journal of Accounting, 42(1), 57–81.
Gerpott, T. J., Thomas, S. E., & Hoffman, A. P. (2008). Intangible assets disclosure in the telecommunications industry. Journal of Intellectual Capital, 9(1), 37–61.
Goh, P. C., & Lim, K. P. (2004). Disclosing intellectual capital in company annual reports: evidence from Malaysia. Journal of Intellectual Capital, 5(3), 500–510.
Graves, O., Flesher, D. L., & Jordan, R. E. (1996). Pictures and the bottom line: the television epistemology of US annual reports. Accounting, Organizations and Society, 21(1), 57–88.
Gray, S. J., Radebaugh, L. H., & Robert, C. B. (1990). International perceptions of cost constraints on voluntary information disclosures: a comparative study of U.K. and U.S. multinationals. Journal of International Business Studies, 21(4), 597–622.
Guo, R.-J., Lev, B., & Zhou, N. (2004). Competitive costs of disclosure by Biotech IPO’s. Journal Accounting Research, 42(2), 319–355.
Guthrie, J., & Petty, R. (2000). Intellectual capital: Australian annual reporting practices. Journal of Intellectual Capital, 1(3), 241–251.
Guthrie, J., Petty, R., & Ricceri, F. (2006). The voluntary reporting of intellectual capital: comparing evidence from Hong-Kong and Australia. Journal of Intellectual Capital, 7(2), 254–271.
Hall, B. H. (2003). Business method patents, innovation, and policy. Paper presented at the Financial Markets Conference of the Atlanta Federal Reserve Bank, Sea Island, Georgia, April 3–5, 2003. Cambridge, MA: NBER Working Paper No. W 9717.
Hall, B. H., Thoma, G., & Torrisi, S. (2007). The market value of patents and R&D: evidence from European firms. Cambridge, MA: NBER Working Paper No. 13426.
Hasseldine, J., Salama, A. I., & Toms, J. S. (2005). Quality versus quantity: the impact of environmental disclosures on the reputations of UK Plcs. The British Accounting Review, 37, 231–248.
Hudson, W. (1993). Intellectual capital: How to build it, enhance it use it. New York: John Wiley & Sons.
Kamath, B. (2008). Intellectual capital disclosure in India: content analysis of ‘TecK’ firms. Journal of Human Resource Costing and Accounting, 12(3), 213–224.
Krippendorff, K. (1980). Content analysis: an introduction to its methodology. Beverley Hill: Sage Publications.
Lang, M. H., & Lundholm, R. J. (2000). Voluntary disclosure and equity offerings: reducing information asymmetry or hyping the stock? Contemporary Accounting Research, 17(4), 623–662.
Lepak, D. P., & Snell, S. A. (1999). The human resource architecture: toward a theory of human capital allocation and development. Academy of Management Review, 24(1), 31–48.
Lev, B. (2001). Intangibles: management, measurement and reporting. Washington: Brookings Institution Press.
Lev, B., & Daum, J. H. (2004). The dominance of intangible assets: consequences for enterprise management and corporate reporting. Measuring Business Excellence, 8(1), 6–17.
Lev, B., & Zambon, S. (2003). Intangibles and intellectual capital: an introduction to a special issue. European Accounting Review, 12(4), 597–603.
Marr, B., Schiuma, G., & Neely, A. (2004). The dynamics of value creation: mapping your intellectual performance drivers. Journal of Intellectual Capital, 5(2), 312–325.
Marsnik, S. J., & Thomas, R. E. (2010). Drawing a line in the patent subject-matter sands: does Europe provide a solution to the software and business method patent problem? Boston College International and Comparative Law Review, 34(2), 227.
MERITUM Project (2002). Guidelines for managing and reporting on intangibles, Madrid.
Milne, M., & Adler, R. (1999). Exploring the reliability of social and environmental disclosures content analysis. Accounting, Auditing and Accountability Journal, 12(2), 237–256.
METI (2005). Guidelines for disclosure of intellectual assets based management. Tokyo: METI, October.
Muessig, A. (2010). Risk reporting in management commentary—evidence from public entities in Germany. In Proc. of the 4th European risk conference, Nottingham, September 13th–15th, 2010.
OECD (2006). Intellectual assets and value creation, implications for corporate reporting.
Oliveras, E., Gowthorpe, C., Kasperskaya, Y., & Perramon, J. (2008). Reporting intellectual capital in Spain. Corporate Communications: An International Journal, 13(2), 168–181.
Penrose, E. T. (1995). The theory of the growth of the firm. New York: John Wiley.
Perreault, W. D., & Leigh, L. E. (1989). Reliability of nominal data based on qualitative judgments. Journal of Marketing Research, 26(2), 243–250.
Power, M. (2005). The invention of operational risk. Review of International Political Economy, 12(4), 577–599.
Robb, S. W. G., Single, L. E., & Zarzeski, M. T. (2001). Non-financial disclosures across Anglo-American countries. Journal of International Accounting, Auditing & Taxation, 10(1), 71–83.
Roos, G., Roos, J., Dragonetti, N., & Edvinsson, L. (1997). Intellectual capital: navigating in the new business landscape. New York: New York University Press.
Schneider, A., & Samkin, G. (2008). Intellectual capital reporting by New Zealand local government sector. Journal of Intellectual Capital, 9(3), 456–486.
Schrand, C. M., & Elliott, J. A. (1998). Risk and financial reporting: a summary of the discussion at the 1997 AAA/FASB conference. Accounting Horizons, 12, 271–282.
Sengupta, P. (1998). Corporate disclosure quality and the cost of debt. The Accounting Review, 73(4), 459–474.
Selltiz, C., Wrightsman, L. S., & Cook, S. W. (1976). Research methods in social relations (3rd ed.). New York: Holt, Rinehart and Winston.
Shih, K.-H., Liu, Y.-T., Jones, C., & Lin, B. (2010). The indicators of human capital for financial institutions. Expert Systems with Application, 37, 1503–1509.
Society for Knowledge Economics (2005). Australian guiding principles on extended performance management. Available online at http://www.ske.org.au/download/Australian-Guiding-Principles.pdf.
Stewart, T. A. (1997). Intellectual capital: the new wealth of organizations. New York: Doubleday.
Striukova, L., Unerman, J., & Guthrie, J. (2008). Corporate reporting of intellectual capital: evidence from UK companies. The British Accounting Review, 40(4), 297–313.
Sujan, A., & Abeysekera, I. (2007). Intellectual capital reporting practices of the top Australian firms. Australian Accounting Review, 17(2), 62–74.
Sveiby, K. E. (1997). The new organizational wealth: managing and measuring knowledge based assets. San Francisco: Berrett Koehler.
Teece, D. J. (2000). Managing intellectual capital. Oxford: Oxford University Press.
The Boston Consulting Group (2010). Creating value in banking 2010: after the storm. Available at www.bcg.com/documents/file39719.pdf, last download on September 1st, 2010.
Thietart, R. A. (2003). Méthodes de recherche en management. Paris: Dunod.
Toms, J. S. (2002). Firm resource, quality signals and the determinations of corporate environmental reputation: some UK evidence. The British Accounting Review, 34(3), 257–282.
Vandemaele, S. N., Vergauwen, P. G. M. C., & Smith, A. J. (2005). Intellectual capital disclosure in The Netherlands, Sweden and the UK. Journal of Intellectual Capital, 6(3), 417–426.
Van Hoose, D. (2007). Market discipline and supervisory discretion in banking: reinforcing or conflicting pillars of Basel II? Journal of Applied Finance, 17(2), 105–118.
Vergauwen, P. G. M. C., & Van Alem, F. J. C. (2005). Annual report IC disclosures in The Netherlands, France and Germany. Journal of Intellectual Capital, 6(1), 89–104.
Vergauwen, P., Bollen, L., & Oirbans, E. (2007). Intellectual capital disclosure and intangible value drivers: an empirical study. Management Decision, 45(7), 1163–1180.
Wahlström, G. (2006). Worrying but accepting new measurements: the case of Swedish bankers and operational risk. Critical Perspectives on Accounting, 17, 493–522.
Weber, R. P. (1990). Basic content analysis (2nd ed.). Newbury Park: Sage Publications.
White, G., Lee, A., & Tower, G. (2007). Drivers of voluntary intellectual capital disclosure in listed biotechnology companies. Journal of Intellectual Capital, 8(3), 517–537.
Williams, S. M. (2001). Is intellectual capital performance and disclosure practice related? Journal of Intellectual Capital, 2(3), 192–203.
Xifra, J., & Ordeix, E. (2009). Managing reputational risk in an economic downturn: the case of Banco Santander. Public Relations Review, 35(4), 353–360.
Yongvanich, K., & Guthrie, J. (2005). Extended performance reporting: an examination of the Australian mining industry. Accounting Forum, 29, 103–119.
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
About this article
Cite this article
Mention, AL. Exploring voluntary reporting of intellectual capital in the banking sector. J Manag Control 22, 279–309 (2011). https://doi.org/10.1007/s00187-011-0139-2
Published:
Issue Date:
DOI: https://doi.org/10.1007/s00187-011-0139-2