Voluntary disclosure of intellectual capital information by deposit money banks in Nigeria
| DOI | https://doi.org/10.1108/JIC-09-2019-0229 |
| Pages | 1035-1052 |
| Published date | 29 May 2020 |
| Date | 29 May 2020 |
| Author | Nnachi Egwu Onuoha,Grace Nyereugwu Ofoegbu,Regina Gwamniru Okafor,Vincent Aghaegbunam Onodugo |
| Subject Matter | HR & organizational behaviour,Behavioural accounting,Organizational structure/dynamics,Information & knowledge management,Accounting & Finance |
Voluntary disclosure of intellectual
capital information by deposit
money banks in Nigeria
Nnachi Egwu Onuoha
Department of Accountancy, Alex-Ekwueme Federal Univeristy, Abakaliki, Nigeria
Grace Nyereugwu Ofoegbu and Regina Gwamniru Okafor
Department of Accountancy, University of Nigeria, Nsukka, Nigeria, and
Vincent Aghaegbunam Onodugo
Department of Management, University of Nigeria, Nsukka, Nigeria
Abstract
Purpose –The purpose of this paper is to investigate the extent and quality of voluntary intellectual capital
disclosure (ICD) by deposit money banks (DMBs) in Nigeria.
Design/methodology/approach–Data were collected from a survey of 271 informants and content analysis
of the annual reports of 12 DMBs in Nigeria. The data collected were analysed using factor analysis, t-test,
Friedman test for related sample and Wilcoxon signed-rank test.
Findings –The findings of this paper indicate that the extent of ICD is significant and higher than thequality
of ICD, which is insignificant, with the extent of disclosure highest in the relational component of intellectual
capital. It also shows that a significant difference exists amongst the extent of human capital, structural capital
and relational capital disclosures, with the significant difference traced to the difference between the extent of
disclosures of relational capital and human capital.
Research limitations/implications –The results can be interpreted across the target sample where the
study covers a five-year period and 12 DMBs in Nigeria. However, the study provides a robust empirical basis
for policymakers and regulators to develop future ICD regulatory guidelines for banks and push for
improvement in the quality of ICD by DMBs.
Originality/value –No previous studies of voluntary ICD have considered the extent and quality of ICD by
DMBs in Nigeria. Further, this study shed the light on a new human capital item related to “employee health
and mental state”; therefore, it extends and supports the previous empirical literature on ICD.
Keywords Intellectual capital, Voluntary, Disclosure, Human capital, Deposit money banks
Paper type Research paper
1. Introduction
The dynamism of the corporate environment and the need to achieve a sustained competitive
advantage have greatly encouraged a shift of emphasis from physical capital to knowledge
capital. Currently, in “knowledge-intensive”firms such as banks, insurance companies,
telecommunication firms and hotels, the quantum of physical assets are no longer
overemphasized; instead, the main focus is on knowledge assets. These knowledge assets, as
intangible assets, especially those created within a given entity, have been identified as one of the
criticalsources of competitiveadvantage of firms.As noted by Wu and Sivalogathasan (2013),
the globalization of markets has forced firms to enhancetheir competitive advantage through
internally generated intangible assets, which cannot be easily mimicked by competitors.
As intangible assets, intellectual capital (IC), which includes research and development
(R&D), information technology (IT), corporate image, customer relations, business
collaborations, employee competencies, has supplanted physical and financial capital as
the most significant value driver for modern enterprises (An, 2012). It, therefore, presupposes
that the physical capital and financial capital together with intellectual capital assets of an
organization create value for that organization. However, the measurement of IC has
continued to pose considerable problems to the management of organizations. Apart from
Voluntary
disclosure of
intellectual
capital
1035
The current issue and full text archive of this journal is available on Emerald Insight at:
https://www.emerald.com/insight/1469-1930.htm
Received 27 September 2019
Revised 22 January 2020
Accepted 2 April 2020
Journal of Intellectual Capital
Vol. 21 No. 6, 2020
pp. 1035-1052
© Emerald Publishing Limited
1469-1930
DOI 10.1108/JIC-09-2019-0229
measurement-related difficulties, the issue of IC reporting requirements has not reached
consensus, leading to its under-disclosure in corporate annual reports. This situation has led
to varying disclosure practices among different firms and across various industries, both
nationally and supranationally.
Lack of agreement on how to measure and report IC has been responded to by firms
through engaging in deliberate IC disclosure (ICD) practices. This situation has led some of
these firms to produce “stand-alone”reports on intellectual capital while, in some cases, such
reports are lacking. Specifically, there have been renewed interests in voluntary disclosures
of intellectual capital by the firms that have prioritized the need for reduction of information
asymmetry which, according to C
orcoles and Ponce (2013), is capable of heightening the
informative situation of stakeholders.
No doubt that there have been many empirical investigations of ICD practices in many
companies (Bozzolan et al., 2006;Li et al., 2008;Campbell and Rahman, 2009;Hidalgo, Garcıa-
Meca; Martınez, 2011). The results of such studies revealed that there is an overall increase in
IC information reporting among companies. The practice underscores not only the quest for
reduction of information asymmetry by these companies but also the need to showcase their
knowledge assets to their numerous stakeholders.
It has been noted thatthe primary empirical studies on ICDhave, in the past, focussed on
many countries such as “the UK (Campbelland Rahman, 2009) , Ireland (Brennan, 2001), the
USA (Abdolmohammadi, 2005),and also in some emerging marketssuch as Malaysia (Goh and
Lim, 2004), Sri Lanka (Abeysekera and Guthrie, 2005), Singapore (Abeysekera, 2008), India
(Kamath, 2017)and China (An and Davey, 2010)”(AbdulRahman, 2013, p. 2). There havebeen
studies on ICD in Egypt (Ismail, 2011), Saudi Arabia (Razak et al., 2016), Spain (C
orcoles and
Ponce, 2013)andFrance(Boujelbene and Affes, 2013).However, the extant literature on prior
studies on ICD indicates that such studies are either scarce in Nigeria or under-reported,
especially concerning the deposit money banks (DMBs). Consequently, there is a need for a
study tobridge this gap. The study exploredthe extent and qualityof ICD by DMBs in Nigeria.
Precisely,the study ascertained:the extent of ICD in the annual reports of DMBsin Nigeria, the
qualityof ICD in the annual reportsof DMBs in Nigeria and thedifference amongstthe extent of
disclosures of human,structural and relational capital to bridgethe gap.
Our findings indicate that the extent of disclosure of IC information in the annual reports
of DMBs in Nigeria is significant and, on average, higher than the quality of IC information
disclosure, which is insignificant and low. The findings further show that while the most
disclosed of the components of IC by these banks is the relational capital, human capital is the
least disclosed.
The paper contributes theoretically and empirically. First, whereas signalling theory has
been employed to explain the incentive to disclosure of IC information by the banks,
proprietary cost theory was employed to explain the disincentive to disclose IC information.
These explanations have further validated both theories as robust frameworks for explaining
IC reporting behaviours. Second, empirical contribution is made by exploring: the extent of
ICD in the annual reports of DMBs in Nigeria, the quality of ICD in the annual reports of
DMBs in Nigeria and the difference amongst the components of the extent of ICDs.
The rest of the paper is organized as follows: Section 2 introduces the literature review and
hypotheses development, followed by the methodology in Section 3. Then the discussion of
results is presented in Section 4, conclusions and recommendations and implication of the
study are in Section 5.
2. Literature review and hypotheses development
2.1 Intellectual capital information disclosure
The widening difference between market value and book value, which has generally been
attributedto IC, has heightened the need to reportits information. Consequently,the world has
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