Intellectual capital reporting and credit risk analysis
| Published date | 01 March 2005 |
| Date | 01 March 2005 |
| DOI | https://doi.org/10.1108/14691930510574645 |
| Pages | 28-42 |
| Author | José Guimón |
| Subject Matter | Accounting & finance,HR & organizational behaviour,Information & knowledge management |
Intellectual capital reporting and
credit risk analysis
Jose
´Guimo
´n
Autonomous University of Madrid, Madrid, Spain
Abstract
Purpose – Aims to increase our understanding of the role of intangibles in credit risk analysis and of
the main factors which enable or disable the impact of intellectual capital (IC) reports.
Design/methodology/approach – Discusses recent findings from the European Union-funded
E*Know-Net project (2001-2003) and reviews other works on the subject. This literature review is
complemented with two case studies. The first presents the results of an experimental workshop with
12 credit risk analysts from Banco Santander Central Hispano, a major Spanish bank. The second case
study looks at how the European Investment Bank integrates intangibles into its project appraisal
process.
Findings – Provides a comprehensive conceptual framework to analyze the impact of IC reporting in
credit risk analysis. Argues that there is a significant gap between the perceived potential impact of IC
reports and their real impact in practice, and proposes a classification of the barriers in the market for
corporate information that help explain this apparent paradox. The case studies presented illustrate
some of the factors that enable or disable the impact of IC reporting in practice.
Originality/value – Increases understanding of the relevance and impact of intangibles and IC
reports in the lending process. Draws conclusions for companies, credit institutions and policy makers.
Keywords Intangible assets,Intellectual capital, Credit,Risk analysis, Spain
Paper type Case study
1. Intellectual capital and capital markets
It is widely claimed that the existing accounting system rarely recognizes intangible
resources and activities despite their growing importance in modern economies (Lev
and Zarowin, 1999). As a result, there would tend to be a bias in financial markets
against intangible-intensive investments, such as research and development (R&D),
human capital or organizational development. Ultimately, communication gaps
between firms and financial institutions on the critical intangibles that drive
innovation and business performance result in an inefficient allocation of limited
financial resources, curtailing economic growth. The lack of adequate information on
intangibles is also seen as one of the major reasons behind increased volatility and
information asymmetry in capital markets.
Efforts to alleviate this problem are generally directed towards two complementary
directions, which I will call the “capitalization approach” and the “extended reporting
approach”. The capitalization approach attempts to relax the conditions that must be
met for intangibles to be capitalized, so that they can more easily appear as
investments in the balance statement rather than as current expenses. The restrictions
The Emerald Research Register for this journal is available at The current issue and full text archive of this journal is available at
www.emeraldinsight.com/researchregister www.emeraldinsight.com/1469-1930.htm
This article was produced within the context of E*Know-Net, a EU-funded research project on
intellectual capital coordinated by the Autonomous University of Madrid and integrated by 15
European research centers. An earlier version of this paper was submitted to the EU Commission
in January 2004 as part of the Final Report of E*Know-Net (STRATA Program, Ref:
HPV1-CT-2001-50002).
JIC
6,1
28
Journal of Intellectual Capital
Vol. 6 No. 1, 2005
pp. 28-42
qEmerald Group Publishing Limited
1469-1930
DOI 10.1108/14691930510574645
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