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Abstract
Purpose - Intellectual capital (IC) disclosure is investigated over three years covering the IT bubble and its aftermath in three different countries (The Netherlands, Sweden and the UK).
Design/methodology/approach - Content analysis is applied to the annual reports of the sample companies; 180 annual reports from The Netherlands, Sweden and UK are analysed in order to make an inter-country comparison. Three measurement years (1998, 2000 and 2002) were chosen in order to analyse the trend in disclosure over the years.
Findings - The study reveals that the Swedish sample companies disclose more, on average, about IC than Dutch and UK ones. In general, there is an upward trend in the average amount of IC disclosure over the observation period, although this trend is slightly reversed in Sweden over the period 2000-2002. This could be an indication of convergence in disclosure practices (the average amount of IC disclosure) in the countries under scrutiny.
Originality/value - The paper shows convergence in IC disclosure practices in the countries under study. This could point towards the establishment of a standard of the IC disclosure level amongst companies. The findings in this paper are of value to firms that are already disclosing IC or are considering doing so.
Keywords Intellectual capital, Disclosure, Annual reports, The Netherlands, Sweden, United Kingdom
Paper type Research paper
Introduction
Companies increasingly rely on intellectual capital (IC) in their value creation process, rather than on traditional production factors such as physical and financial capital. Investors are generally well-informed about the latter two production factors through the traditional financial report. There is a growing agreement, however, that information deficiencies arise from the shortcomings of the traditional accounting system in reflecting the value of IC (Lev and Zarowin, 1999). Companies can, of course, choose to voluntarily disclose information about their IC in order to (partly) overcome these deficiencies.
In this study, we examine how samples of Dutch, Swedish and British firms respond to the challenge of reporting on IC. In particular, we study the evolution of voluntary IC disclosure in annual reports over a five-year time horizon (1998-2002). The aim is to compare IC disclosure practices and their evolution in the three countries.
The paper is structured as follows. The next section gives an overview of...