• Capital Market Pressures and the Format of Intellectual Capital Disclosure in Intellectual Capital Intensive Firms

      Li, Jing; Mangena, Musa (2014)
      Purpose - A number of studies have examined firms’ intellectual capital (IC) disclosure practices. However, the presentation format of IC disclosure (text, numerical and graphs/pictures) is yet to be examined. In addition, there is little evidence on the impact of capital market pressures on IC disclosure. This study aims to examine the relation between presentation format of IC disclosures and three market factors (market-to-book ratio, share price volatility and multiple listing). Design/methodology/approach - Using content analysis, we examine the level of IC disclosure provided in the annual reports of 100 IC-intensive listed UK firms. A 61-IC-item research instrument is used to measure IC disclosure and regression analysis is employed to examine the relation between disclosure and the market factors, controlling for corporate governance and firm specific variables. Findings - Text is the most commonly used format for IC disclosure, whilst the use of graphs/pictures is very low. The findings of the relation between market factors and IC disclosure are mixed. Market-to-book ratio is significantly related to disclosure in text and numerical, but not to graphs/pictures. Share price volatility is only associated with graphs/pictures, whilst multiple listing is only related to text. Originality/value - Our findings suggest that the impact of capital market pressures on IC disclosure might differ with presentation format. In this context, the study makes a significant contribution to the IC disclosure literature.
    • Corporate compliance with non-mandatory statements of best practice: the case of the ASB statement on interim reports.

      Mangena, Musa; Tauringana, V. (2007)
      This paper contributes to our understanding of compliance with non-mandatory statements of best practice. Specifically, we examine the efficacy of agency-related mechanisms on the degree of disclosure compliance with the ASB Statement on interim reports. Using data drawn from a sample of 259 UK companies listed on the London Stock Exchange, we show that although overall disclosure compliance is high (74.5% of the items of information being disclosed), companies do not fully comply with the ASB Statement on interim reports. We employ an ordinary least square (OLS) regression model to establish whether selected company-specific and corporate governance characteristics (proxying for agency-related mechanisms) are related to the degree of disclosure compliance. Our results indicate that multiple listing, company size, interim dividend and new share issuance are positively associated with the degree of compliance. We also find that the degree of disclosure compliance is positively associated with auditor involvement, audit committee independence and audit committee financial expertise. These results have important implications for policy because they suggest that whilst agency-related mechanisms may motivate compliance with best practice non-mandatory statements, full compliance may be unattainable without regulations.
    • Disentangling the Effects of Corporate Disclosure on the Cost of Equity Capital: A Study of the Role of Intellectual Capital Disclosure

      Mangena, Musa; Li, Jing; Tauringana, V. (2016-01)
      In this paper, we investigate whether intellectual capital (IC) and financial disclosures jointly affect the firm’s cost of equity capital. In contrast to prior research, we disaggregate disclosures into IC and financial disclosures and examine whether the two disclosure types are jointly related to the cost of equity capital. We also investigate whether IC and financial disclosures have an interaction effect on the cost of equity capital. Using data for a sample of 125 UK firms, we find a negative relationship between the cost of equity capital and IC disclosure. We find that the relationship between financial disclosure and the cost of equity capital is magnified when combined with IC disclosure. Additionally, we find that IC and financial disclosures interact in shaping their effects on the cost of equity capital. Further analyses suggest that the effect of financial disclosure on the cost of equity capital is augmented for firms characterised by a medium level of IC disclosure. These results provide important insights into the relationship between disclosures and cost of equity capital and have policy and practical implications.
    • The effect of audit committee characteristics on intellectual capital disclosure

      Li, Jing; Mangena, Musa; Pike, Richard H. (2012-06)
      This paper, using data from 100 UK listed firms, investigates the relationship between audit committee characteristics and intellectual capital (IC) disclosure. We find that overall IC disclosure is positively associated with audit committee characteristics such as the size and frequency of meetings, and negatively associated with audit committee directors’ shareholding. We find no significant relationship between IC disclosure and audit committee independence and financial expertise. We also observe that the association between audit committee characteristics and IC disclosure varies with the IC components (i.e. human capital, structural capital and relational capital), suggesting that the underlying factors that drive various components of IC disclosure are different. These results have important implications for policy-makers in that they confirm that the effectiveness of audit committees in the corporate reporting processes is a function of certain characteristics.
    • The effect of audit committee shareholding, financial expertise and size on interim financial disclosures.

      Mangena, Musa; Pike, Richard H. (2005)
      In recent years, corporate failures and accounting irregularities have led to concerns about the effectiveness of audit committees in the financial reporting process. In response, corporate governance committees in different countries have made specific recommendations designed to enhance the role of the audit committee in executing its financial reporting oversight duties. We investigate in this study, the effect of some of the recommendations by empirically examining the relationship between selected audit committee characteristics and the level of disclosure in interim reports of a sample of 262 UK listed companies. Specifically, the audit committee characteristics examined are shareholding of audit committee members (as a proxy for audit committee independence), audit committee size and audit committee financial expertise. Employing both a weighted and unweighted index to measure interim disclosure, the results indicate a significant negative association between shareholding of audit committee members and interim disclosure. Our results provide evidence of a significant positive association between interim disclosure and audit committee financial expertise. We find no significant relationship between audit committee size and the extent of disclosure in interim reports. Overall, however, our results suggest that audit committee characteristics have an impact on its monitoring effectiveness of the financial reporting process. These results have important implications for corporate governance policy-makers who have a responsibility to prescribe appropriate corporate governance structures to ensure that shareholders are protected
    • Goal-setting participation and goal commitment: Examining the mediating roles of procedural fairness and interpersonal trust in a UK financial services organisation

      Sholihin, Mahfud; Pike, Richard H.; Mangena, Musa; Li, Jing (2011-06)
      This study investigates whether participation in goal-setting within performance measurement and evaluation processes affects goal commitment and if so, whether the effect is mediated by procedural fairness and interpersonal trust. Using a sample of 54 managers within a UK financial services organisation, this study finds that participation in goal-setting is positively associated with goal commitment. Further analysis arising from introducing procedural fairness and interpersonal trust as mediating variables reveals that the association is significantly mediated by procedural fairness. Overall, these findings offer empirical evidence on the importance of procedural fairness on the relationship between participation and goal commitment.