The value relevance of human capital, corporate governance and intangible assets in growth enterprises: evidence from Hong Kong

Abstract

This article attempts to investigate the value relevance of intangible assets, human capital and corporate governance disclosed in the Initial Public Offer (IPO) prospectuses of growth enterprises in Hong Kong. Prior studies have explored the relevance of prospectus earnings forecasts for investors and the determinants of the accuracy of such estimates. However, for enterprises that advance with dependence on new knowledge and technological innovation in emerging business sectors, recent studies have suggested the value relevance of intangible assets and other intangible factors, namely, human capital and corporate governance. The experience of growth enterprises that went through an IPO in Hong Kong provides an independent source of evidence for the exploration of the value relevance of such intangible factors. Through the analysis of the disclosed information of 214 growth enterprises, this study confirms the significance of specific components of these intangible factors and an integrative relevance of financial and nonfinancial information on Value Sustainability (VS). It argues that the regulator's enforcement on adequate disclosure and accounting treatment, pertinent to the recently harmonised reporting standard to uncover the underlying fundamentals of a listing candidate, is more critical than solely pinpointing its corporate governance disclosures.