Is Cost of Equity Capital influenced by intellectual capital? An empirical analysis from the perspective of Indian companies
Year: 2024
Type: article
Abstract: Purpose This empirical study is developed with an aim of exploring how and to what extent the current year’s as well as lagged years’ disclosure level of intellectual capital (IC) influences the firm's value which is measured through the Cost of Equity Capital. Design/methodology/approach The content analysis technique is applied on the annual reports of 50 sample companies to construct an IC disclosure index for measuring the volume of IC disclosure and to collect other relevant information for the study periods from 2015–16 to 2019–20. However, due to unavailability of information for all the study periods, 7 companies were eliminated and finally 43 companies are used for analytical purpose. Keeping in mind about the aim of this research, regression equations are run to analyze the cause–effect relationship between the IC disclosure level and the Cost of Equity Capital after excluding the influence of other factors like firm size, unlevered beta and market-to-book ratio. Findings The present study finds that the amount of IC disclosure has an inverse association with the cost of equity capital. Our study also confirms that lagged years’ IC disclosure has a greater inverse effect than the current year’s IC disclosure on the Cost of Equity Capital. Originality/value For the first time in the literature of IC disclosure in the perspective of Indian context, this empirical study takes an initiative to investigate the impact of current year’s as well as backlog years’ IC disclosure level on the Cost of Equity Capital.
Author: Chiranjit Ghosh
Language: English
Subfield: Strategy and Management
Domain: Social Sciences
Open Access status: diamond
OpenAlex ID: W4404048276