Abstract
Capital market regulators have concentrated on company transparency, including and also intellectual capital disclosure (ICD) throughout the previous decade. Jensen and Meckling (1976) stated that high disclosure can reduce agency costs and the uncertainty faced by investors. This research aims to explore the ways the board structure, comprising board size, independence, female board members and CEO dichotomy, affects intellectual capital disclosure within Indonesia. A sample comprising 323 non-commercial companies in 7 industries listed publicly from 2008 to 2017 on Indonesia Stock Exchanges (IDX) was analyzed using ordinary least squares (OLS) regression. This study found a positive and significant impact of board size which implied that a higher total number of members of the board of directors results in a higher extent of ICD. The larger the number of outside board members, the better. This makes the board more independent and allows it to provide a higher level of corporate governance to shareholders. The findings revealed the level of ICD significantly and negatively affected CEO duality statistically. The complete findings indicated robust implications of board structure for ICD. This study may be utilized to facilitate higher intellectual capital awareness and foster ICD execution by IDX capital market administrators.
Highlights
In the past decade, capital market regulators in Indonesia have focused on disclosure by companies including intellectual capital disclosure (ICD)
The purpose of this study is to look into the impact of board structure, including board size, board independence, female board members, and the CEO dichotomy, on ICD in Indonesia
The results of the study found that the board structure plays a role in influencing the ICD
Summary
Capital market regulators in Indonesia have focused on disclosure by companies including intellectual capital disclosure (ICD). Disclosure of company information plays an important role for investors to assess risks and opportunities appropriately. The existence of elements of uncertainty regarding the quality of the company, in terms of assets or cash flow risks and marketable securities, makes investors request additional information to reduce the possibility of errors in making investment decisions. The annual reports’ information disclosure comprises mandatory and voluntary disclosure, with the former being a requisite of applicable accounting regulations and standards, while the latter is employed for company administrators to offer accounting and further information important for annual report users in making decisions. Many investors think that companies in Indonesia only focus on mandatory disclosure rather than voluntary disclosure.
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