Abstract
At present, disclosure of IC information across the globe is done by very few leading corporations purely on a “voluntary” basis. Unfortunately, the omission of IC information may adversely influence the quality of decisions made by shareholders, or lead to material misstatements. This study attempts to provide an insight in to the “narrative” style of IC disclosures done by Indian corporations. Initially, a longitudinal study was carried out to analyze how Indian firms—Reliance Industries Limited, Balrampur Chini Mills, and Shree Cement Limited—measure and report their IC reports. In order to survey the recent IC disclosure scenario, we conducted another study of 16 Indian IT corporations in which the “content analysis” was done on their 2007 to 2009 annual reports. The results of this study confirmed that IC disclosure in these IT corporations is almost negligible and its disclosure had not received any preference from the mentors of these corporations. IC reports may initially be used for “internal” management purposes; but an “external” stakeholder-focus of IC report should be the ultimate goal.
Highlights
Business dynamics of the 21st century are increasingly determined and driven by Intellectual Capital (IC) elements
After some initial research on business and intangible resources in the Indian corporations, we found that three corporations had published their first IC reports in 1997, which were discontinued later on
After some initial research on business and intangible resources in the Indian corporations, we found that three private-sector corporations had published their first IC report in the year 1997
Summary
Business dynamics of the 21st century are increasingly determined and driven by Intellectual Capital (IC) elements. As existing economic and business metrics track a declining proportion of the real economy, the deficiency and inconsistency in the disclosure of IC-related information is creating growing information “asymmetry” between “informed” and “uninformed” investors. This provides a fertile ground for informed investors to extract higher abnormal returns (Chiucchi et al, 2008) [3]. IC is increasingly being recognized as having much greater significance in creating and maintaining competitive advantage and shareholder value. This clearly calls for a refreshed understanding of business principles, information disclosure, and decision-making processes
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