Forward-Looking Intellectual Capital Disclosure in IPOs : Implications for Intellectual Capital and Integrated Reporting

Purpose: This study contributes to intellectual capital (IC) disclosure research. Focusing on reducing the information asymmetry associated with agency theory, it investigates the extent to which managers and owners disclose IC in initial IPO prospectuses. In particular, it examines the influence on post-issue stock performance based on the IPOs of technology companies listing on the NASDAQ from 2002 to 2013. Parallels are drawn to Integrated Reporting (IR), which was developed after the the gobal financial crisis (GFC) because of the perceived shortcomimgs of regulated forms of financial reporting. Design/methodology/approach: We apply a two-stage methodology, using content analysis of prospectuses to determine the extent of IC disclosure, then combining this data with market data using regression analysis to determine the influence of IC disclosure in IPO prospectuses on post-issue stock performance.Findings: According to the content analysis results these IPO prospectuses contain significant amounts of IC disclosure for our subsequent analysis. We find that after the GFC technology companies disclose more IC information. The econometric analysis also reveals that IC disclosure has a higher influence on post-issue stock performance after the GFC than before.Practice implications: The research confirms that more IC disclosure information in prospectuses may positively influence companies' post-issue stock performance and can help to overplay companies that disclose less information about IC, especially in a long-term run. However, we caution that disclosing IC information to investors is not the panacea for increased post-IPO share performance. Research implications: The research shows how IPO prospectuses are a valid form of disclosure to investigate the impact of reducing IC information asymmetry because they contain significant amounts of forward-looking non-financial information about the company's development. Also, our results are relevant to discussions about the impact of