The influence of board size on intellectual capital disclosure by Kenyan listed firms
| DOI | https://doi.org/10.1108/14691931011085650 |
| Pages | 504-518 |
| Date | 19 October 2010 |
| Published date | 19 October 2010 |
| Author | Indra Abeysekera |
| Subject Matter | Accounting & finance,HR & organizational behaviour,Information & knowledge management |
The influence of board size on
intellectual capital disclosure by
Kenyan listed firms
Indra Abeysekera
School of Accounting and Finance, University of Wollongong, Wollongong,
Australia
Abstract
Purpose – The purpose of this paper is to examine the effect of board size on firms disclosing more,
rather than less, strategic and tactical intellectual capital resources using the top 26 of the 52 firms
ranked by the Nairobi Stock Exchange for market capitalization in 2002 and in 2003. This study
identifies intellectual capital disclosure by three separate categories: internal capital, external capital,
and human capital. Hence, this study examines the influence of board size on six disclosure outcomes.
Design/methodology/approach – The study develops hypotheses using the resource dependency
theory. Using content analysis for data generation, this study classifies firms that disclose more versus
those that disclose less, using the mean for all firms for each disclosure outcome.
Findings – Using logistic regression, the study examines the influence of board size on each
disclosure outcome and finds that firms disclosing more tactical internal capital and more strategic
human capital have larger boards.
Practical implications – The findings provide insights into how a larger board size can help boards
to overcome skill deficiencies in making more discretionary disclosure related to future earnings.
Originality/value – This study analyses the influence of the board size on six aspects of intellectual
capital disclosure.
Keywords Boards, Intellectualcapital, Kenya
Paper type Research paper
1. Introduction
The low business skills of the board members of Kenyan firms are a concern for
investors assessing the boards’ ability to provide future-earnings information
(Gatamah, 1999). This study examines the governance attributes of the top 26 of the 52
firms listed with the Nairobi Stock Exchange, over a two-year period (2002 to 2003), to
determine whether a larger board enables Kenyan listed firms to overcome the
business-skill crisis through collective decision-making. The business acumen of the
directors becomes crucial in determining discretionary disclosure of economic
resources not mandated in financial statements. The inclusion in annual reports of
these unaccounted economic resources, which impact future earnings, can enha nce
stock price and help firms reduce cost of funds. This study uses intellectual capital
resources as a proxy for firms’ unaccounted economic resources. Although definitions
of intellectual capital are diverse (Edvinsson and Sullivan, 1996; Brooking, 1997), a
widely agreed interpretation is that it represents the “unaccounted economic capital” of
future earnings not captured in financial statements (Simister et al., 1998, p. 2). Such
The current issue and full text archive of this journal is available at
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The author is indebted to comments of two anonymous referees and the Editor. The
responsibility for the contents of this paper nonetheless remains entirely that of the author.
JIC
11,4
504
Journal of Intellectual Capital
Vol. 11 No. 4, 2010
pp. 504-518
qEmerald Group Publishing Limited
1469-1930
DOI 10.1108/14691931011085650
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