An exploratory study on the usefulness of intellectual capital information. Abdulrahman Anam Ousama*

Transcription

1 Int. J. Accounting and Finance, Vol. 3, No. 2, An exploratory study on the usefulness of intellectual capital information Abdulrahman Anam Ousama* Department of Accounting, Faculty of Commerce and Management Sciences, Ibb University, Ibb, Yemen *Corresponding author Abdul Hamid Fatima and Abdul Rashid Hafiz-Majdi Department of Accounting, Faculty of Economics and Management Sciences, International Islamic University Malaysia, Jalan Gombak, Kuala Lumpur, Malaysia Abstract: Intellectual capital (IC) is considered as the intangible resources that help in value creation of the company. IC consists of three categories: internal capital (INC), external capital (EXC) and human capital (HUC). This paper aims to examine the academics perception of the usefulness of IC information disclosed in the annual reports of Malaysian listed companies. The paper found that the respondents perceived IC information (i.e., overall) to be useful for the purpose of decision making. The findings also showed that the mean of the perception of the usefulness of EXC information is higher compared to the means of INC and HUC. In addition, the findings of the t-tests reveal that the perceptions of IC (i.e., overall), INC, EXC and HUC information are statistically significant. Moreover, the paired samples t-test confirmed the significant differences in the perception of usefulness between INC with EXC and EXC with HUC. Keywords: intellectual capital; IC; usefulness; disclosure; perception; academics; Malaysia. Reference to this paper should be made as follows: Ousama, A.A., Fatima, A.H. and Hafiz-Majdi, A.R. (2011) An exploratory study on the usefulness of intellectual capital information, Int. J. Accounting and Finance, Vol. 3, No. 2, pp Biographical notes: Abdulrahman Anam Ousama is an Assistant Professor of Accounting at the Department of Accounting, Ibb University, Yemen. He graduated with a Bachelor of Accounting (Honours) degree from Sana a University, Yemen and obtained his Master s degree and PhD in Accounting from the International Islamic University Malaysia. His research interests are in intellectual capital, financial accounting and reporting, management accounting and Islamic accounting and finance. Copyright 2011 Inderscience Enterprises Ltd.

2 178 A.A. Ousama et al. Abdul Hamid Fatima is an Assistant Professor at the Department of Accounting, Faculty of Economics and Management Sciences, International Islamic University Malaysia. She graduated with a Bachelor of Accounting (Honours) degree from the International Islamic University Malaysia and obtained her Master s degree in Accounting and Finance and PhD in Accounting and Finance from Lancaster University, UK. Her research interests are in auditing, accounting education and financial accounting and reporting. Abdul Rashid Hafiz-Majdi is an Associate Professor at the Department of Accounting, Faculty of Economics and Management Sciences, International Islamic University Malaysia. He graduated with a Bachelor of Accounting (Honours) degree from the International Islamic University Malaysia and obtained his Master s degree in Accounting and Finance and PhD in Accounting and Finance from Lancaster University, UK. His research interests are in financial accounting and reporting, capital market-based research and corporate governance. 1 Introduction The shift from the traditional economy into the new economy (i.e., knowledge economy) has pushed companies to depend more on intangible (intellectual) capital to achieve objectives, gain competitive advantages and create value (Ordoñez de Pablos, 2003; Abeysekera, 2006; Striukova et al., 2006; Whiting and Miller, 2008). Therefore, companies have tried to recognise and measure their intellectual capital (IC), and have started to disclose information to satisfy the information needs of their users. This is because users expect information from the companies that provides an indication of firm value, hence making it useful for their decision making purposes. Thus, the issue of usefulness of IC information has become important for both companies and users. Generally, IC is defined as the difference between the company s market value and book value (Ordoñez de Pablos, 2005; Brennan, 2001). IC can also be defined from the value creation perspective as intellectual material knowledge, information, intellectual property, experience that can be put to use to create wealth [Stewart, (2000), p.xi]. In addition, IC can be defined from an accounting perspective (Canibano et al., 2000). From this perspective, IC is defined as non-monetary sources of probable future economic profits, lacking physical substance, controlled (or at least influenced) by a firm as a result of previous events and transactions (self-production, purchase or any other type of acquisition) and may or may not be sold separately from other corporate assets. [MERITUM, (2002), p.9] 1. Commonly, IC is classified into three categories: internal capital (INC), external capital (EXC) and human capital (HUC). First, INC refers to IC components within the company which consists of items such as patents, copyrights, trademarks, concepts, research and development, administrative systems, network systems, innovations, information systems, management philosophy, and corporate culture (e.g., Guthrie and Petty, 2000; Seetharaman et al., 2004; Abeysekera and Guthrie, 2005; Ousama et. al., 2011a, 2011b). Second, EXC reflects the IC benefits and advantages gathered through relationships and collaborations with external parties, for example, relationships with customers and suppliers, customer satisfaction, business collaborations, distribution channels, licensing

3 An exploratory study on the usefulness of intellectual capital information 179 agreements, franchising agreements, marketing and reputation (e.g., Bontis, 2003; Seetharaman et al., 2004; Guthrie et al., 2006; Ousama et al., 2011a, 2011b). Third, HUC refers to the human resources of the company, which consists of employee's competence, education, skills, training, values and experience (e.g., Bontis, 2003; Seetharaman et al., 2004; Abeysekera and Guthrie, 2005; Guthrie et al., 2006; Ousama et al., 2011a, 2011b). There exists a large amount of literature focused on describing, measuring and finally disclosing IC. However, there are limited studies internationally and in Malaysia that examine the usefulness of IC information. The issue of IC is particularly important in Malaysia, a developing country, which hopes to strengthen its capital market by attracting both local and foreign investments. In order to attract these investments, Malaysian companies should provide information that enhances transparency, reduces information asymmetry and indicates firm value to the users, thus, making the information useful to these users. If needed information, like IC, were disclosed, companies firm value may be considered to be easier to estimate. Therefore, the various groups of users should be questioned regarding information that they perceive as being useful, particularly in the context of IC. However, a group of users, which is often neglected by prior studies, due to the difficulty in determining their population, is the individual shareholder. Although these shareholders do not hold many shares individually, they form a considerable percentage collectively, thus, their opinion should matter. Hence, this study has selected academics as a proxy for individual shareholders in order to overcome the difficulty of identifying the population. As a result, the current paper aims to examine academics perception of the usefulness of IC information as disclosed in the annual reports of listed companies. According to the International Accounting Standards Board (IASB) s Conceptual Framework for Financial Reporting, information that is useful has two characteristics: relevance and faithful representation (IASB, 2010). In order for information to be relevant, it should have predictive value, confirmatory value and be material. While, for information to be faithfully represented, it should be complete, neutral and free from error (IASB, 2010). Even though usefulness of financial reporting information consists of the above components, this study does not measure each of these components of usefulness separately. This is because the study is exploratory in nature and in this initial research the perception of usefulness (in general) of IC information had to be studied. Therefore, the instrument was specifically designed to attain the perspective of respondents on the IC items usefulness, in general, instead of measuring the components of usefulness separately. Also, since the focus of the study is on the IC items, the survey instrument already comprises 101 items; thus, it would become too lengthy if it were to contain these 101 items as well as measure the different components of usefulness separately for each of these items. The paper hopes to contribute to the following. First, this study should be beneficial to the companies as they may wish to discover the information, in relation to IC, that is perceived useful by their users. This could assist them in determining the information that they should consider disclosing in order to enhance their transparency and also possibly attract investment. Second, this study contributes towards knowledge by extending and filling the gap in the literature concerning the usefulness of IC information in Malaysia, which at present is limited. Therefore, this paper can be considered as an initial research in the field of usefulness of IC information in Malaysia, particularly from the users perspective, which would lead to further investigation and research.

4 180 A.A. Ousama et al. The paper is structured as follows. Section 2 reviews the literature, followed by an elaboration on the research method. Section 4 provides a discussion of the empirical results. Finally, the paper ends with the conclusion. 2 Literature review There is considerable literature on IC in Malaysia that has examined various issues, i.e. recognition, measurement, management, reporting and effects of IC on performance and market value (e.g., Bontis et al., 2000; Keow, 2002; Seetharaman et al., 2004; Goh and Lim, 2004; Wan Fadzilah et al., 2004; Saudah et al., 2004; Abdul Latif and Fauziah, 2007; Yau et al., 2009; Norman et al., 2009; Amrizah and Rashidah, 2009; Ousama et al., 2011a, 2011b). A brief highlight on the Malaysian studies is provided as follows. Bontis et al. (2000) and Wan Fadzilah et al. (2004) examined the inter-relationship among IC measures and business performance in the Malaysian industries. On a slight variation, Saudah et al. (2004) studied the influence of IC possessed by a company (i.e., degree and form) on management accounting practices instead of performance. In addition, Keow (2002) investigated the relationship between IC and knowledge management; Seetharaman et al. (2004) is a theoretical paper that assessed different methodologies of IC measurement whereas Abdul Latif and Fauziah (2007) conducted a study on IC management by examining to what extent Malaysian listed companies use IC management in their business models. Goh and Lim (2004) and Yau et al. (2009) focused on IC reporting by determining the disclosure of IC in the annual reports of listed companies. Yau et al. (2009) also examined the factors influencing IC disclosure, as did Ousama et al. (2011b). In contrast, Norman et al. (2009) studied the factors influencing the company s IC performance from a corporate governance view based on the efficiency of IC. Whereas, later studies like Amrizah and Rashidah (2009) and Ousama et al. (2011a) investigated the relationship between companies IC and organisation effectiveness of listed companies, and the effects of IC information disclosed in the annual reports of listed companies on their market capitalisation, respectively. Therefore, in reviewing the above, the Malaysian studies on IC has limited literature on the usefulness of IC information from the users perspective. Specifically, in focusing on studies on usefulness and the importance of IC information, there are several studies from different countries such as the USA, Austria, Canada, South Africa and Hong Kong (e.g., Mavrinac and Siesfield, 1998; Bornemann et al., 1999; Miller et al., 1999; April et al., 2003; Cuganesan et al., 2005, respectively), and even Malaysia (Gan, 2001). Table 1 summarises these empirical studies in terms of the objective, research method and main findings. The findings by Mavrinac and Siesfield (1998) show that the investors used non-financial information in making their decisions as it is considered to be useful by them. Bornemann et al. (1999) focused on the importance of IC information and found that there was increasing awareness of IC information, even though there were no clear concepts. In addition, they found that the respondents (i.e., managers) perceived IC information to be important for making decisions.

5 An exploratory study on the usefulness of intellectual capital information 181 Table 1 A summary of the literature on the usefulness and importance of IC information Study/country Objective(s) Research method Main finding Mavrinac and Siesfeld (1998) USA Bornemann et al. (1999) Austria Miller et al. (1999) Canada Gan (2001) Malaysia To examine the usefulness and influence of non-financial information on the investments decisions by institutional investors. To examine the perceptions of management of the awareness of IC (as one of their objectives). To examine the perceptions of managers of the usefulness and potential use of IC information. To examine the perceived usefulness of indicators of IC in Malaysian corporate sectors. To examine indicators in use and not in use by both sectors of the study. 275 institutional portfolio managers (investors) Questionnaire survey 40 CEOs and top management executives Questionnaire survey (based on Mavrinac and Siesfeld s study) 226 managers for the questionnaire and seven to ten managers for interviews from four large companies Questionnaire survey Focus group interviews 101 managers from two sectors (bankingcommercial banks and manufacturing involved in high technology) Questionnaire survey which was adopted from Miller et al. (1999) All non-financial data (40 items) is considered to be useful by the investors (e.g., innovativeness, management credibility). The use of non-financial data by investors was on average 35% of all information. 88% of the respondents perceived IC information to be important. There was increasing awareness of the issues of IC, even though there were no obvious concepts. Managers perceived HUC information to be most useful. Managers perceived that there is interaction between HUC, INC (structural) and EXC (customers) capital. In both sectors (financial services and non-financial services), HUC indicators have high level of usefulness/awareness. Less than 50% of three categories indicators were used by both sectors, with a high degree of use for HUC.

6 182 A.A. Ousama et al. Table 1 A summary of the literature on the usefulness and importance of IC information (continued) Study/country Objective(s) Research method Main finding April et al. (2003) South Africa Cuganesan et al. (2005) Hong Kong To examine how the mining companies rate the IC attributes. To examine users perceptions of IC reporting (as one of their objectives). Seven largest mining listed companies (managers) Interviews Questionnaire survey which was adopted from Miller et al. (1999). 238 financial analysts Questionnaire survey Overall IC rating reached 68%. Managers of the mining companies rate HUC highest of all at over 80%, followed by INC and EXC. Most of the respondents (91%) perceived that IC reporting (information) is useful in making decisions. Similarly, Miller et al. (1999) found that IC information was perceived to be useful, although the HUC information (e.g., leadership skills, employee motivation, employee satisfaction, and years of experience in the profession) was the most useful information compared to EXC (e.g., customer satisfaction, growth in business or services volume) and INC (e.g., number of multi-functional project teams, number of new product introductions). Moreover, they found that the overall information usage by categories is prioritised as follows: HUC, EXC and INC. However, Cuganesan et al. (2005) found that the majority of the financial analysts (i.e., 91%) in Hong Kong perceived IC information to be useful in making their decisions. This finding is consistent with the perception of the usefulness of IC information by investors and managers, as discussed in the above studies (e.g., Mavtinac and Siesfield, 1998; Bornemann et al., 1999). In Malaysia, Gan (2001) found that the level of awareness of IC information was encouraging. In addition, the results showed that the HUC information was perceived to be highly useful compared to INC and EXC information. This finding is similar to that of Miller et al. (1999). Furthermore, Gan (2001) found that in the non-financial sector, the information about HUC (e.g., competency, creativity, and innovation), INC (e.g., number of new products introduced), and EXC (e.g., number of customer complaints, feedback, and customer satisfaction) were perceived to be very useful. Based on reviewing the above literature, it is clear that there are limited studies on the usefulness of IC information. In addition, most of these studies focus on the perception of managers. In Malaysia especially, the perception of users on IC information is even less sufficiently explored by the literature, as there are very limited studies [only Gan (2001)]. Therefore, the literature needs to be extended and the gap filled. Hence, the current paper tries to examine the usefulness of IC information from the academics perspective, as a proxy for individual shareholders.

7 An exploratory study on the usefulness of intellectual capital information Research method 3.1 Sample selection The sample of the paper focuses on the academic staff. As mentioned before, these academics are a proxy for individual shareholders. The study has specifically selected accounting lecturers at accounting departments of public universities. Lecturers at the department of accounting are chosen as respondents as they are familiar with annual reports (Rosiatimah, 2006) and are aware of the issue of IC. Therefore, based on their experience and knowledge in the accounting area they are able to analyse the information in annual reports. Also, accounting lecturers may represent a sample of individual shareholders as they too invest in shares and they may be considered as users of the annual reports. The paper has selected five public universities: Universiti Putra Malaysia (UPM), International Islamic University Malaysia (IIUM), Universiti Kebangsaan Malaysia (UKM), Universiti Malaya (UM) and Universiti Teknologi Mara-Shah Alam (UiTM) in the Klang Valley (i.e., Kuala Lumpur and its environs). The selection of the public universities in the Klang Valley was with the objective of increasing the response rate, as it is commonly known that, generally, the response rate of questionnaire surveys is low. In fact, in Malaysia, questionnaire surveys were found to have an average response rate of 16% (PricewaterhouseCoopers, 2002). Therefore, in order to enhance the response rate, the questionnaires were distributed personally. The follow up process was also done repeatedly and again the questionnaires were collected personally. The population of accounting lecturers for each university was generated from its respective website. However, the accounting lecturers who were on study leave were eliminated from the list. Hence, the total number of the lecturers from all selected universities was 190. Table 2 lists the population of accounting lecturers in each of the selected universities. Table 2 Universities UPM Number of academics at selected public universities No. of accounting staff 36 a IIUM 26 b UKM 31 c UM 22 d UiTM 75 e Total 190 Source: a UPM (2007), b IIUM (2007), c UKM (2007), d UM (2007), and e UiTM (2007) 3.2 Data collection A survey was conducted to collect the data. The questionnaire was a self-developed questionnaire based on a wide-ranging review of the IC literature, particularly those on IC disclosure. The review of prior IC disclosure literature was done to identify IC items, which are expected to be disclosed in the annual reports of companies as they could be useful for decision making purposes (e.g., investment decisions). The first developed draft of the questionnaire contained 92 IC items. Then, the questionnaire was subjected to

8 184 A.A. Ousama et al. a pilot test, a reliability analysis (i.e., internal consistency of the measures) and validity test based on a panel of expert accounting lecturers. The result of the reliability analysis shows that the Cronbach s Alpha values are above 0.90 for IC (i.e., overall), INC, EXC and HUC. Hence, it indicates all items in the questionnaire are reliable. Nevertheless, the outcome of the pilot and validity tests resulted in improving the questionnaire by increasing the number of items to 101 (i.e., 35 items for INC, 30 items for EXC and 36 items for HUC). In addition, some items were reworded and the content of the questionnaire was restructured. The questionnaire is divided into two sections: 2 section A comprises the main content of the questionnaire, i.e., measure of the usefulness of IC information (i.e., items) based on the IC categories. Each category was measured by closed-ended questions using a 5-point Likert scale. The question at the beginning of each category, for example INC, was as follows: In your opinion as a shareholder, to what extent do you perceive these internal capital items as being useful for your decision making purposes, hence, should be disclosed in the annual reports of listed companies. Please indicate by circling a number in the range of 1 = totally not useful to 5 = very useful. In addition, there was an open-ended question where the respondents are required to write in the spaces provided any IC disclosure items that they perceive to be useful, but have not been included in the survey. INC includes sub-categories such as innovation (e.g., number of products and services, information about new products or services), technology investments (e.g., IT expenditure/investments), R&D and management philosophy (e.g., the vision and mission). EXC comprises sub-categories such as business partnering and alliance (e.g., information about licensing/franchising agreements), customers (e.g., information about major customers, share market), supplies, market value and share price (e.g., market share price highlight) and shareholders (e.g., number of shareholders); and HUC has sub-categories such as employees education, employees' welfare (e.g., share scheme/share options scheme to employees), training and education of employees and employee satisfaction. The respondent s demographic information (e.g., gender, age, working experience) is in section B of the questionnaire. 4 Empirical results and discussion 4.1 Background of the survey and respondents As mentioned in the research method section, 190 questionnaires were distributed personally to the respondents at the selected universities. Follow up procedures of personal visits and s were undertaken to ensure a good response. These procedures resulted in a response rate of 29% (i.e., 56 completed and useable questionnaires). According to Staden (1998), a response rate of about 15% is sufficient for questionnaire surveys, however, the average response rate is about 20% (Staden, 1998) and specifically 16% in Malaysia (PricewaterhouseCoopers, 2002). Therefore, the response rate of this study may be considered acceptable as it is higher than the general average response rate. The early and late respondents were subjected to a non-response bias test using t-test under the assumption that the respondents who respond less readily and late are like nonrespondents, thus, they proxy for non-responses (Oppenheim, 2001; Salleh et al., 2001). The t-test result reported no significant differences between the early and late respondents; hence, it indicates that non-response bias does not exist.

9 An exploratory study on the usefulness of intellectual capital information 185 Table 3 Respondents background Gender Age Frequency Percentage (%) Male Female Total 56 Age Age Age Age Total 56 Working experience Under Above Total 56 Part B of the questionnaire, as mentioned earlier, contains demographic information. Table 3 shows the respondents based on gender, age and working experience. Around 70% of the respondents were females and 30% were males. More than 41% of the respondents were aged between years old, followed by 39% aged between years old. Nearly, 43% of the respondents had working experience over 15 years, followed by 30% between 5 10 years. Thus, based on the academic working experience of the respondents, they seem to have considerable experience and should be able to provide their opinions on the issue of usefulness of IC information. 4.2 Reliability test Further analysis of the reliability test was conducted on the actual questionnaires. The Cronbach s Alphas for the IC (i.e. overall), INC, EXC, and HUC were 0.980, 0.944, 0.933, and 0.972, respectively, as shown in Table 4. These results confirm the results of the pilot test which indicate that the internal consistency of the measures is reliable. Table 4 Reliability test results IC categories No. of cases No. of items Cronbach s alpha IC (overall) INC EXC HUC

10 186 A.A. Ousama et al. 4.3 Results and discussion Descriptive staticial analysis Table 5 shows the results of the descriptive statistics analysis of the perception of the usefulness of IC information. The mean of the usefulness of IC information (i.e., overall) was 3.909, which indicates that the respondents, generally, perceived the IC information disclosed in the annual reports of Malaysian listed companies to be useful for their decision making purposes. This result is consistent with other studies on the usefulness of IC information (Miller et al., 1999; April et al., 2003; Cuganesan et al., 2005). More specifically, the means for INC, EXC and HUC information were 3.862, and 3.755, respectively. The results indicate that the EXC information was perceived to be more useful compared to INC information and HUC information. This result contradicts the findings by Bornemann et al. (1999), Gan (2001) and April et al. (2003), as they found HUC information to be perceived highly useful compared to the other two (INC and EXC information). There are some possible reasons for such results. First, it might be because each paper has used different measurement instruments (i.e., in terms of different IC items). Second, the respondents in this study might consider disclosing information about the relationship between the company and the outsiders, to be more useful as it may reflect the strong foundations of the company. Based on the results of the descriptive statistics analysis, it can be said that the acadmics perceived IC information (i.e., overall) to be useful for decision making purposes. Table 5 Descriptive statistics results of the perception on the usefulness of IC IC (overall) INC EXC HUC Mean Median Std. deviation Std. error mean Skewness Kurtosis The descriptive statisitic analysis also shows some tests of normality of the data. First, the values of the mean and median are relatively close to each other, which can be considered as normally disturbuted. Second, based on the values of skewness and kurtosis and the rule of thumb, these values lie within the range of 2 and +2, which means that they are normally distributed (Pallant, 2001) One-sample t-test Further analysis was performed based on one-sample t-test to examine the significance of the perception of the academics on the usefulness of IC information (i.e., overall) and based on the different categories of IC (i.e., INC, EXC and HUC). The assumptions of applying the one-sample t-test were tested, and the results indicate that all of them were met. In accordance with the test of significance of the perception of academics on the usefulness of IC information, Table 6 shows the results based on a test value of 3, as the questionnaire used a 5-point Likert scale. The result reveals that IC information was

11 An exploratory study on the usefulness of intellectual capital information 187 perceived to be useful by the respondents at the 0.01 significance level (p = 0.000). This result supports the findings of the descriptive statistics, which showed that the mean scores were above 3.5. These findings indicate that generally IC information is perceived useful by the sample of users for their decision making purpose. The significance of the perception of the usefulness of IC information in the current paper is consistent with most prior studies on the usefulness of IC information (e.g., Bornemann et al., 1999; Gan, 2001; Cuganesan et al., 2005), which found that users (e.g., managers, analysts, investors) perceived IC information to be useful for their decision making purposes. In addition, Table 6 shows the results based on the IC categories. INC information, EXC information and HUC information were perceived to be useful by the academics at the highest significance level of 0.01 (p 0.000). In summary, the results of the one-sample t-test indicate that IC information (i.e., overall), INC, EXC and HUC information were perceived useful to a significant extent by the respondents. Table 6 One-sample t-test results of the perception on the usefulness of IC IC/categories Df Mean diff. t-statistic Sig. t IC (overall) *** INC *** EXC *** HUC *** Notes: The test value is 3. ***Significant at the 0.01 level. Df = degree of freedom Paired-samples t-test Further analysis was conducted to test if there are significant differences in the perception of usefulness between the different IC categories. Table 7 shows the results of the paired-samples t-test between IC categories based on three paired-groups, INC and EXC, INC and HUC and EXC and HUC. The results show that there are significant differences between the respondents perception on the usefulness of INC and EXC and EXC and HUC at the 0.01 significance level (p = 0.000). However, the result shows that there is no significant difference between the perception on usefulness of INC and HUC. This result supports the findings of the descriptive statistics, which showed that the mean of EXC is higher compared to those of INC and HUC. Therefore, it can be said that the results reveal that academics perceived information on EXC to be significantly more useful than information on INC and HUC. Table 7 Paired-samples t-test results Df Mean Differences Std. deviation Std. error mean t-statistic Sig. t INC and EXC *** INC and HUC EXC and HUC *** Notes: ***Significant at the 0.01 level.

12 188 A.A. Ousama et al Independent samples t-test Additional analysis, based on independent samples t-test, was performed to test if there are significant differences in the perception of the information of IC (i.e., overall), INC, EXC and HUC across gender, age and working experience of the respondents. Tables 8, 9 and 10 present the results of the t-test for gender, age and working experience, respectively. The tables show that there are no significant differences (at 0.05 significance level) between the means of perception of usefulness of IC (i.e., overall), INC, EXC and HUC based on gender, age and working experience of the academics. Thses findings indicate that the respondents gender, age and working experience do not affect their perception on the usefulness of IC (i.e., overall), INC, EXC and HUC information. Table 8 Independent samples t-test results of gender Mean diff. Std. error diff. t-statistic Sig. t IC (overall) INC EXC HUC Table 9 Independent samples t-test results of age Mean diff. Std. error diff. t-statistic Sig. t IC (overall) INC EXC HUC Table 10 Independent samples t-test results of working experience Mean diff. Std. error diff. t-statistic Sig. t IC (overall) INC EXC HUC Correlation analysis To test if the means of the perception of usefulness are correlated for IC categories, the paper conducted the Pearson correlation analysis. Table 11 shows that the responses to the IC and IC categories (i.e., INC, EXC and HUC) are highly correlated at the 0.01 significance level (p = 0.000). This could be expected as these variables are all components of IC and are interrelated to each other. For example good administrative and network systems within the organisation (i.e., INC) would establish better ties with external parties (i.e., EXC) due to their systematic dealings. Similarly, productive R&D (i.e., INC) is likely to be due to competent and highly skilled employees (i.e., HUC). Nevertheless, it should be noted that there are still differences between the variables as

13 An exploratory study on the usefulness of intellectual capital information 189 they are more correlated with overall IC than each other; and based on the findings, as reported in Table 7, the difference between the perception on EXC and INC as well as EXC and HUC are significantly different. Table 11 Pearson correlation analysis results of IC and its categories IC INC EXC HUC IC 0.911*** 0.864*** 0.927*** INC 0.742*** 0.739*** EXC 0.694*** HUC Notes: ***Correlation is significant at the 0.01 level (two-tailed). The values in bold font are the correlation coefficients. The values in italic font are the significance levels. 5 Conclusions This exploratory study s objective was to examine the academics (as a proxy for individual shareholders) perception of the usefulness of the IC information disclosed in the annual reports of listed companies. The findings reveal that the academics perceived IC (i.e., overall), INC, EXC and HUC information to be useful for their decision making purposes. Moreover, INC, EXC and HUC information were found to be statistically significant based on the one-sample t-test; thus, such information is deemed useful for the purpose of making decisions. However, EXC information was perceived to be more useful than INC and HUC information. The study also found that the perception of usefulness of IC did not differ based on gender, age and working experience. There are several implications from the findings. First, since the users perceive IC information to be useful, companies should consider disclosing more IC information in their annual reports to enhance their transparency and also to assist the users in determining a more accurate firm value. Therefore, the findings could be important to Malaysian listed companies, as studies such as this could enhance their understanding on IC information that is needed by users. However, it must be noted that users would generally like more information than less; albeit more information disclosure is costly to the companies. Therefore, second, research like this is important as it helps to identify information, even amongst the IC items, which are deemed more useful than others. Naturally, the items that are perceived to be more useful should be disclosed first before the items that are of less use. Third, the accounting regulators have to play their role. Based on the findings of research like this, the accounting regulators and standard setters can identify the information items that should be given priority. Hence, they can make these items mandatory, for disclosure purposes, and other IC items voluntary. This would also indirectly help to reduce the cost of disclosing these items. Fourth, the study has shown that the respondents perception on usefulness of IC and its components does not change based on gender, age and working experience. This is good news to the

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