The value relevance of intellectual capital disclosure in Malaysian technology-based firms

We investigate the value relevance of intellectual capital disclosure in decision making. We measure intellectual capital disclosure based on content analysis approach. We describe the process of coding the IC disclosure based on R&D disclosure in Cworks Systems's 2005 annual report. We employ univariate and multivariate tests to test our developed hypothesis. Results of multiple analyses indicate that earnings available for common shareholders and intellectual capital disclosure are positively related at 1% significance level to share price. This signifies that market participants regard the intellectual capital disclosure as an important factor in determining market value. However, our study indicates that investors regard non-quantitative IC information as value relevant compared to quantitative information. This indicates the important of non-quantitative and non-financial information in investment decision making, especially in the knowledge based firms. Our study also reveals that among the IC components, relational capital is important in investment decision making. Our findings suggest the general belief that high quality disclosures (or transparency) benefit the share market. Therefore, we believe non financial information is also important to be disclosed in the annual report.