Analysis of determinants influencing the level of intellectual capital disclosure: The case of FTSE 100 entities

Purpose: The paper deals with the issue of intellectual capital (IC) and its disclosure in the financial statements and other parts of annual reports of FTSE 100 entities. The paper aims to identify the determinants that influence entities to reveal IC related information and to highlight the theoretical aspects behind such determinants, resulting in comprehensive findings. The results of the analysis can be used to understand what leads entities to make decisions in the field of non-financial disclosure and help in the development of the IC reporting framework.Design/methodology: The research is devoted to the analysis of the relationship between the level of IC disclosures by companies and the analysed determinants - size, asset structure, profitability, industry and the factor of time. The dataset can be characterised as a panel data set containing 100 firms from the FTSE100 Index for the four most recent financial years (2018-2021). To produce a comprehensive set of results, descriptive statistics are used, followed by regression and correlation analysis. The random effect method is used as it has a higher predictive power than pooled OLS and fixed effect methods in analysing panel data. Findings: Based on the results of the analysis, it was concluded that the profitability measured as ROA is not a key factor of intellectual capital disclosure in the annual reports of FTSE 100 companies. From the point of view of size, there exists a statistically significant relationship between total assets and all components of IC, respectively overall IC. The analysis also showed a statistically significant impact of the sector in which companies operate. Particularly, companies in the service sector report more information on human capital and companies in the high-tech sector report more information on structural capital. A significant effect of asset structure was found for structural capital but only taking into account the effect of goodwill, not through the effect of other intangible assets. Finally, the paper demonstrated a positive and significant effect of the time factor on the level of reporting of all IC components.Originality/value: This paper focuses on the determinants influencing the level of IC reporting in a representative sample of entities from the highly active FTSE100 Index, which provides a very recent and specific data sample from a research perspective. The paper is based on determinants that are frequently reported in existing research, and it extends the scope by incorporating the effect of intangible assets and goodwill as variables representing the asset structure in addition to the effect of time. This paper presents statistically based results on the relationships between the determinants and IC but also between the different elements of IC (human capital, structural capital and relational capital), which provide insights into the structure of reported information on intellectual capital. This insight is very substantial given that many studies ignore the characteristics of the different components of the IC as they may be affected by different determinants.