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Corporate governance and intellectual capital reporting in a period of financial crisis: Evidence from Portugal

Abstract

This article uses an analytical frame that comprised agency theory and a resource-based perspective to explore the influence of boards of directors on listed companies’ voluntary disclosure of information concerning intellectual capital (IC). The IC disclosures in 75 published company reports of 15 listed Portuguese companies in a 5 year period of financial crisis, 2007–2011, are investigated using content analysis and the regression techniques. IC disclosures are found to increase with company size, dual corporate governance models, industry, listing on sustainability indexes and increases in board size up to a maximum point (beyond which disclosures decrease). IC disclosures are reduced by CEO duality and by a higher proportion of independent directors on boards. The year of reporting is not significant, suggesting that the period of financial crisis did not influence the level of IC disclosures. The evidence adduced is consistent with a view that highly visible companies acknowledge the importance of IC disclosures in maintaining their reputation and competitive advantage, even during a period of financial crisis. This article highlights the need for caution in believing that adding extra directors to an existing board will lead to improved disclosure outcomes. In addition, given the token number of females appointed to boards currently, the Portuguese capital market regulator should consider enforcing measures to ensure compliance with EU objectives.

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Notes

  1. The International Integrated Reporting Council (IIRC) (2011) argues that integrating annual reports and sustainability reports into a combined report will build understanding of how performance in one area drives value in another.

  2. Recently, a EU report required publicly listed companies in Europe to commit voluntarily to increase the presence of women on their corporate boards to 30 per cent by 2015 and 40 per cent by 2020, by actively recruiting qualified women to replace outgoing male members (EC, 2012).

  3. Salazar’s dictatorship in Portugal (1932–1968) shaped Portugal as a very ‘masculine’ country. In Salazar’s era, Portuguese society was very conservative. Women had little or no access to senior positions in government or business and their employment was restricted mainly to manual work and domestic duties (Nogueira et al, 1995).

  4. A Securities and Exchange Commission Staff Working Paper (EC, 2011b), titled ‘The Gender Balance in Business Leadership’, reported the average proportion of females on (supervisory) boards of listed companies in the EU was only 12 per cent.

  5. The PSI 20 is a benchmark stock market index of companies trading on Euronext Lisbon. It tracks the prices of the 20 largest listings according to market capitalization and share turnover in the general market of the Lisbon Stock Exchange.

  6. In 2012, women represented 7.4 per cent of the board members of the 20 largest listed companies in Portugal. This was significantly less than the average of 15.8 per cent in the EU. The rate of increase of women on boards between 2003 and 2012 was 0.4 percentage points per annum. ‘At this rate of change, boards with at least 40% of each gender would not be seen for at least 75 years’. (EC, 2013).

  7. This was the case of Banco Espírito Santo. Although this bank declared bankruptcy at the end of 2013, it kept disclosures at the same level in the analysis period.

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Correspondence to Lúcia Lima Rodrigues.

Appendix

Appendix

Table A1

Table A1 Sample companies and industry

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Rodrigues, L., Tejedo-Romero, F. & Craig, R. Corporate governance and intellectual capital reporting in a period of financial crisis: Evidence from Portugal. Int J Discl Gov 14, 1–29 (2017). https://doi.org/10.1057/jdg.2015.20

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Keywords

  • board of directors
  • disclosure
  • intellectual capital
  • financial crisis
  • resource-based perspectives
  • agency theory