Market capitalization effects of intellectual capital disclosure in New Zealand's capital market

The emergence of knowledge-based economies has accentuated the importance of intellectual capital disclosures and the vital necessity of evaluating their impact. Prior research has illustrated the positive influence of ICD on various aspects of firm performance in other countries, raising the question of its potential influence on New Zealand's capital market growth. In light of this, the purpose of this study is to investigate the effect of ICD and the effect of each component of ICD on the market capitalization of listed firms in New Zealand through the lens of Stakeholder Theory. The study uses content analysis performed on a sample of annual reports to investigate whether the firms disclose their Intellectual Capital (IC) and the level of disclosure is measured. The level of disclosure of each component of IC, being the structural capital, relational capital and human capital are all examined using the content analysis. The entire New Zealand Stock Market in 2022 is comprehensively investigated, totaling to a number of 122 listed firms under evaluation. The effect of the overall ICD level is tested against market capitalization of the firms using a multiple regression model in R-Project Software. The impact of each component of ICD on market capitalization of firms is tested in a separate regression model. The results of this study reveal that ICD has a strong positive impact on the market capitalization of listed firms in New Zealand. Additionally, this research concludes that structural capital disclosure, relational capital disclosure, and human capital disclosure all have a strong positive effect on the market capitalization of listed firms in New Zealand. The highest impact on market capitalization was seen by human capital, with structural capital as second in impact level and relational capital having the lowest influence. Aligned with stakeholder theory, the findings of the study suggest that disclosure of IC is an important mechanism for managers to communicate their value to stakeholders, but that the effectiveness of this communication depends on the specific components of intellectual capital disclosed. The study's results support the stakeholder theory, supporting that ICD is a crucial way for managers to demonstrate their worth to stakeholders. The managerial implications of this study lie in that the findings provide businesses with empirical proof that their investment in ICD can benefit their market capitalization, while investors can also use this information to identify better investment opportunities. Finally, governments can establish policies that promote disclosure of IC, thereby stimulating growth in capital markets.

Text 125124 - Full Text.pdf Download (6MB) Official URL or Download Paper: http://ethesis.upm.edu.my/id/eprint/18816

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