Effects of intellectual capital information disclosed in annual reports on market capitalization: Evidence from Bursa Malaysia

Abstract

Purpose – This paper aims to examine the effects of intellectual capital (IC) disclosure in the annual reports of listed companies in Bursa Malaysia (BM) on their market capitalization (MCAP).Design/methodology/approach – The paper uses secondary data for listed companies on BM for the years 2002 and 2006. A disclosure index was used to measure the extent of IC information disclosed in the annual reports. The MCAP data were obtained from the Bloomberg database. The data were analyzed using correlation and regression analyses.Findings – The paper finds that the extent of IC disclosure by Malaysian‐listed companies has a positive significant effect on their MCAP. In addition, the paper found that there is significant positive impact of the control variables (i.e. book value, net profit, firm size and leverage) on the MCAP.Research limitations/implications – Although the paper was focused on the IC information and MCAP data for two years (i.e. 2002 and 2006), it provides empirical evidence that IC disclosure...