International Equity Portfolio Investment Decision and Intellectual Capital Information

Abstract

As the “new” economy which is supposedly mainly fueled by knowledge and ideas relentlessly marches on with globalization, intellectual capitals (IC), such as human capitals, structural and relationship capitals, are getting more and more attention, as they are expanding the horizon of the theory and practice of company valuation. The expanded horizon has certainly created anxieties and uncertainties among investors who have to make decisions involving investment in foreign equities. The resulting uncertainties have triggered a torrent of research on using IC information in forecasting earnings and future cash flows, in valuation and on fund managers’ use of IC information in their investment decision process in an individual country. However, problems of how institutional investors view the role that IC information plays in different financial environments and in different markets of both developed and emerging markets remain largely a terra incognita in research waiting to be explored. Therefore, this paper aims to explore how institutional investors understand company IC information in complex international equity portfolio investment and how they use such information, if they use it at all, in the investment decision process, as well as the factors that influence the usage of IC information by fund managers.