Is corporate governance and intellectual capital disclosure related? a Sri Lankan case

Pratheepkanth Puwanenthiren

doi:10.4038/jbs.v5i2.36

Abstract

This study investigates the association between corporate governance and intellectual capital (IC) disclosure, controlling for firm age and leverage, for a sample of 150 Sri Lankan listed firms. The independent variables comprise various forms of corporate governance attributes: board size, board independent, board meetings and CEO role duality. IC disclosure is measured by a disclosure index. Empirical analysis is conducted using correlation and linear multiple regression analysis. Findings from the empirical analysis indicate that associations between the corporate governance and IC disclosure are generally mixed. There is still no established and generally accepted Sri Lankan framework for IC disclosure, which could be a reason for inconsistency. Results of this study provide useful information for the accounting profession, the regulators and corporations on the effective exercise of corporate governance.

Highlights

Corporate governance as a way in which suppliers of finance to corporations assure themselves of getting a return on their investment (Shleifer & Vishny, 1997)
This study aims to investigate the relationship between corporate governance and Intellectual capital (IC) disclosure of listed Sri Lankan firms
Focussing on the board size, the mean size is approximately 12 directors and that has a significant positive effect on IC disclosure. It seems that boards with more members that in turn are more connected with the environment tend to disclose more on IC disclosure, the results affirm the assertion that H1: There is a significant relationship between the size of the board and IC disclosures

Summary

Introduction

Corporate governance as a way in which suppliers of finance to corporations assure themselves of getting a return on their investment (Shleifer & Vishny, 1997). Governance as a mechanism to reduce these conflicts by monitoring managers’ performance and aligning management’s goals with those of the stakeholders (Brickley & James, 1987) In this sense, one of the most recent and widely discussed issues in both the academic literature and the business press concerns with how to design corporate governance mechanisms to improve firm transparency and to solve the information asymmetry problem arising from the separation between ownership and control (Hidalgo, García-Meca, & Martínez, 2011). This study would hopefully benefit academics, researchers, policy-makers and practitioners of Sri Lanka and other similar countries through exploring the impact of corporate governance on IC disclosure, and pursuing strategies to improve the current status of it

Objectives

Results

Conclusion