Competitiveness and disclosure of intellectual capital: an empirical research in Portuguese banks
| Published date | 10 July 2017 |
| Date | 10 July 2017 |
| Pages | 486-505 |
| DOI | https://doi.org/10.1108/JIC-11-2016-0112 |
| Author | Maria do Rosário Meireles Ferreira Cabrita,Maria de Lurdes Ribeiro da Silva,Ana Maria Gomes Rodrigues,María del Pilar Muñoz Dueñas |
| Subject Matter | Information & knowledge management,Knowledge management,HR & organizational behaviour,Organizational structure/dynamics,Accounting & Finance,Accounting/accountancy,Behavioural accounting |
Competitiveness and disclosure of
intellectual capital: an empirical
research in Portuguese banks
Maria do Rosário Meireles Ferreira Cabrita
UNIDEMI, Department of Mechanical and Industrial Engineering,
Faculty of Science and Technology, FCT, Universidade Nova de Lisboa,
Lisboa, Lisboa, Portugal
Maria de Lurdes Ribeiro da Silva
Escola Superior de Gestão do Instituto Politécnico do Cávado e do Ave Campus do IPCA,
Barcelos, Portugal
Ana Maria Gomes Rodrigues
Faculdade de Economia da Universidade de Coimbra, Coimbra, Portugal, and
María del Pilar Muñoz Dueñas
Facultad de Ciencias Económicas y Empresariales,
Universidad de Vigo, Vigo, Spain
Abstract
Purpose –The purpose of this pape r is to investigate the level of inte llectual capital (IC) awarenes s among
Portuguese bank manag ers and which disclosur e techniques are most comm on. The annual report is
regarded by some authors as the most important vehi cle of information abou t banks’affairs because of
some specific characteristics of banks’activities. However, org anizations are increas ingly using their
webpages to disclose a bro ad spectrum of informati on. The objectives of this st udy are twofold: to
investigate how Portu guese bank managers pe rceive the impact of IC di sclosure on the bank’s
competitiveness; an d to assess the extent to which Portuguese b anks voluntarily report their IC in annu al
reports vs webpages.
Design/methodology/approach –The methodology involved in the exploratory study includes the
collection of secondary data –annual reports and websites –collected from the 28 banks operating in
Portugal, and semi-structured interviews from 25 banking managers. Content analysis is applied using a
constructed index based on two European frameworks –Intellectus and InCaS –slightly modified to take into
consideration the peculiarities of the sector.
Findings –Results show higher level of IC disclosure in annual reports than that provided in websites.
Human capital and structural capital are the most reported category in annual reports and, conversely, the
disclosure of relational capital is higher in the webpages. Findings are found similar in comparison to various
other studies on the subject which reveal very low level of IC disclosure, not yet receiving priority from the
mentors of banks. Interviews reveal that not many managers recognize the need and significance of
measuring and reporting IC, although it is recognized as a driver of competitiveness. For protecting business
confidentiality, banks do not want to report information of sensitive nature.
Research limitations/implications –The analysisis limited to a single sector. Futureresearch can expand
to other industries(e.g. manufacturing, technological, services) to enablea more comprehensive understanding
of IC disclosure in Portugal. The cross-sectional approach is also a limitation. A longitudinal study could be
conducted for capturing the trend of reporting practices during the period. Further research could apply
researchmethods other than content analysis(e.g. questionnaire survey,interviews or mixed-methods)in order
to obtain a more in-depth viewof how the Portuguese organizations manage,measure and report their IC.
Practical implications –Research may be of relevance for both banking managers and regulators. For
banking managers because it offers an opportunity to envisage their banks’future potential for growth and
competitiveness. For regulators, the relevance of the study focusses on their understanding of developing
mandatory reporting or additional policy requirements.This study provides a motivation forfurther research
that contributes to a bodyof knowledge and practices on the IC disclosure.
Social implications –Emerging from the years of a financial crisis, restoring trust and confidence is the
most critical challenge for banks to become competitive. IC disclosure could help to restore confidence.
Journal of Intellectual Capital
Vol. 18 No. 3, 2017
pp. 486-505
© Emerald PublishingLimited
1469-1930
DOI 10.1108/JIC-11-2016-0112
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1469-1930.htm
486
JIC
18,3
Originality/value –The existing literature on the IC reporting and disclosure in the context of banking
sector is limited. Based on the Intellectus model and the InCaS model we built an index of IC disclosure to
banking sector which contributes to a greater accuracy, transparency and reliability in the disclosure of this
unique sector. This initiative may encourage its applicability in other sectors.
Keywords Competitiveness, Data analysis, Disclosure, Intellectual capital reporting, Banking industry
Paper type Research paper
1. Introduction
Intellectual capital (IC) is the dominating resource in the knowledge-based economy;
however, traditional accounting practices only partially recognize the value of an
organization’s IC. Some studies (Guthrie et al., 2007; Chen and Pan, 2011) show that although
IC reporting is still low, there has been an increase in IC disclosure in annual reports over the
years, even in sectors where IC may not be expected to be a significant value driver, such as
real estate, utilities and retailing (Unerman et al., 2007). While there is an increasing evidence
that the IC of an organization represents the path to creating modern and competitive
environments, there are inadequate disclosures of IC in the financial statements of
organizations (Petty and Guthrie, 1999, 2000; Brüggen et al., 2009).
Effective management of knowledge has become a key to corporate success especially in the
knowledge-based industries. Data from Morgan Stanley’s World Index show that the listed
value of these knowledge intensive companies, in the USA, ranges between twice and nine
times their book value since much of their value is intangible (Edvinsson and Sullivan, 1996).
Thedifferencebetweenthecompany’s market value and book value is said to represent its
IC (Edvinsson and Malone, 1997; Sveiby, 1997). But what is the value of IC? –Measuring the
value of IC is difficult, but the literature presents a plethora of methods that can do it
(Edvinsson, 1997; Sveiby, 1997; Matos, 2013).
The importance of IC transcends sectoral differences, being particularly critical to the
banking sector mainly due to the fact that knowledge is the main output and input in these
institutions. Differing from the manufacturing industries, the financial service industry provides
knowledge-based products and services, integrating professional competencies and market
needs to realize profits from financial knowledge and risk management (Shih et al., 2010).
The business nature of the banking sector is knowledge intensive and its staff is “intellectually”
(Mavridis, 2004, 2005) more demanded than the staff of other economic sectors. Banks use a
huge amount of human capital and customer capital for their survival and competitiveness
(Kamath, 2007), being described as a knowledge-intensive, skills-based and relationship-rich
industry (Muhammad and Ismail, 2009). Banking operations involve close interaction between
their employees and customers and rely, to a larger extent, on the integration of information and
communication technologies for the development of new products and services (Mention and
Bontis, 2013). Although physical capital is important for banks to operate, it is the IC that
determines the quality of services provided to customers (Goh, 2005). Additionally, the
importance of IC to the banking sector is leveraged by the increasing complexity and more
liberal environment that the banks are currently operating in, in which competitiveness depends
critically on the quality of human IC and the ability to leverage on these talents (Muhammad and
Ismail, 2009). Due to the competitiveness and dynamism of the current operating environment, IC
managing and reporting is critical for banks to develop a cutting edge strategy ( Joshi et al.,2010).
Furthermore, despite the critical role of IC in banks performance there have been very
few studies that explore how banks disclose information on the resources that provide them
with their competitive advantages (Bhasin, 2012). Although the literature documents an
increasing trend in IC disclosure, there is limited research on whether organizations benefit
from improved IC disclosure, namely how it influences their competitiveness. In a review of
the current state of financial and external disclosure research, Parker (2007) identified IC
reporting as a major area for further research.
487
Competitiveness
and disclosure
of IC
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