IPO prospectus: Exploring the expectation gap on Intellectual Capital information

Abstract

This study explores the preparers' and users' views on the decision usefulness of intellectual capital (IC) information in the prospectuses of firms undergoing listing for the first time ('IPO firms') in the Malaysian securities market. In addition, the categories of IC information (i.e., external, internal and human capital) in relation to specific industry sectors are considered. Questionnaire survey forms were distributed to 126 respondents who comprised preparers and users of initial public offering (IPO) prospectuses. Both parties considered IC information as useful for decision-making and external capital was considered the most important category of disclosure. Preparers were willing to supply IC information in the prospectus and users indicated that they intended to use it for decision-making. However, there was a major mismatch in the supply and demand of IC information by category in IPO issues in some industry sectors suggesting the existence of an information asymmetry gap between preparers and users.