In the new economic system which is knowledge-based or knowledge economic system ; value creative activity go one of the important issues in the universe and tends to be based on intangible instead than touchable assets. Harmonizing to Al-Ali ( 2003 ) , in the cognition economic system, companies ‘ capital and resources consists of 80 % of intangible assets and resources and 20 % of tangibles. This high per centum reflects the importance of rational capital as companies ‘ capital and resource in which has attracted research workers to analyze it.
In Malaysia, the development of human capital like authorization of the human outlook and rational capacity of the states is one of the targeted country or authorities focal point under the Ninth Malaysia Plan.
Intellectual capital is defined as intangible assets which include engineering, client information, trade name name, repute and corporate civilization that are priceless to a house ‘s competitory power ( Low and Kalafut, 2002 ) , ) . Hence, from the definition, Low and Kalafut conclude that, rational capital consists of three constituents. The first constituent is silent cognition and innovativeness of the employees. The 2nd constituent is substructure of human capital such as good working system, invention and betterment procedures of structural capital and the last constituents is external relationships of the house such as clients ‘ capital.
Intellectual capital has been regarded as a outstanding beginning of competitory advantage of assorted organisations, which influence the degree of innovativeness and creativeness that lead to the addition of concern public presentation and a state ‘s economic growing.
Therefore, to be competitory in the planetary market, a progressive developing Asiatic state like Malaysia has to efficaciously reassign from merely being an input-driven to a knowledge-driven economic system that focuses more on utilizing human cognition and accomplishments, instead than on productions of labour-intensive goods ( Goh, 2005 ) .
Intellectual capital revelation has been having an increasing sum of attending among the companies around the universe such as Australian companies, Italian companies and many more. However, in Malaysia non many companies reported on identifiable intangible assets. ( Tan, 2000 ) found that merely 0.2 per centum of the entire assets of the companies listed on the KLSE revealed intangible assets other than good will. He besides noted that the figure of companies describing identifiable intangible assets was undistinguished.
Since, nowadays there is a planetary tendency and demand for more utile and comprehensive non-financial information about the operating activities of houses ( Anderson and Epstein, 1996 ) hence, Malayan companies should voluntarily disclosed about rational capital in their one-year studies.
The revelation of rational capital in Malaysia companies may be derived by these factors such as degree of board independency, house age, degree of purchase and size of house. Therefore, this survey is conducted to look into the factors which are act uponing the voluntary rational capital revelation among Malayan companies.
In general, this survey seeks for the factors which are act uponing and ensuing to the voluntary rational capital revelation among Malayan companies. Besides that, this survey besides wants to cognize the current degree of rational capital revelation among Malayan companies.
Main research inquiries are:
What is the current degree of rational capital revelation of Malayan companies?
How much Malayan companies disclosed information sing the rational capital in their one-year study?
Specifically, the undermentioned research inquiries would be addressed in this survey:
What are the factors that determine voluntary rational capital revelation among Malayan companies?
How make these factors ; degree of board independency, house age, degree of purchase and size of steadfast influence voluntary rational capital revelation among Malayan companies?
1.4 Research Aims
The general aim of this survey is to derive utile penetrations on the development of rational capital revelation among Malayan listed companies. Specifically, this survey tries to accomplish the undermentioned three aims:
To place the current degree of voluntary rational capital revelation among Malayan listed companies.
To place the factors that act uponing the rational capital revelation among Malayan listed companies.
To analyze if there is any relationship between company size, degree of board independency, degree of purchase and house age with the degree of rational capital revelation among Malayan listed companies.
Significance of the Study
Contribution to knowledge: This survey in general will uncover the state of affairs of the current degree of the rational capital revelation among Malayan listed companies. Furthermore, it can explicate and derive apprehension on the determiners or the factors which act uponing the degree of rational capital revelation among the companies in Malaysia.
Contribution to policy maker/standard compositors: This survey will give a utile feedback to governments or regulative organic structures. The utile feedback will help them to develop the practical criterion sing the rational capital which can be applied by the whole companies in Malaysia particularly. Furthermore, this survey may besides promote the policy shaper or criterion compositors to do it compulsory for Malayan companies to unwrap rational capital information in their one-year studies.
Scope and Restrictions of the Study
This survey has been conducted with several restrictions such as:
The survey is conducted merely among public listed companies in Malaysia. Hence, the consequence may non be generalized to other types of companies like little medium companies in Malaysia.
The sample size is one of the restrictions of this survey. There are merely 50 companies are selected as the sample. Therefore little sample will non comprehensively or accurately exemplify the existent state of affairs occur in Malaysia.
Another restriction is refers to content analysis. Analyzing the one-year studies based on the specified list of rational capital ( IC ) which means related footings may non supply the whole image every bit good as the IC revelation patterns.
This survey merely concentrate on Malaysia context, therefore the consequence will non be generalized to other state.
This survey merely limit to 78-item revelation index developed by Bukh et Al. ( 2005 ) .
The above- mentioned restrictions have narrowed down the range of the research and hopefully, the consequence of the research could be utile.
This chapter discusses and summarizes the literatures on all variables under survey. The first portion of this chapter discusses on literature on rational capital revelation. The literatures are arranged harmonizing to dependent variable and independent variables. The dependent variable is the rational capital revelation is discussed foremost. The remainder of the chapter summarizes all the independent variables. There are four independent variables involve in the survey. They are degree of board independency, house age, degree of purchase and house size.
Intellectual capital revelation
Harmonizing to ( Marr et al. , 2003 ) , there are a few grounds for the companies to unwrap rational capital information in their one-year studies. They are ; aid organisations formulate their schemes, to measure scheme executings, to help in variegation and enlargement determinations, usage as footing for compensations and to pass on steps to external stakeholders.
Harmonizing to ( PricewaterhouseCoopers, 1999 ) , revelation of rational capital will raise some benefits for the organisations. Among of the benefits are ; it will heighten transparence in term of more unwrap on intangible information instead than touchable information. Besides that, it will ensue in lower cost of capital and therefore higher portion monetary value. Another benefits is by unwraping rational capital information, it will assist animate a sense of religion among the work force and other major stakeholders and in conclusion will back up long term vision of the organisation.
The revelation of rational capital will be analyzed utilizing two theories. They are stakeholder theory and legitimacy theory. Under stakeholder theory, an organisation ‘s direction is expected to take on activities expected by their stakeholders and to describe on those activities to the stakeholders ( Guthrie et al. , 2004 ) . This theory besides suggests that all stakeholders have a right to be provided with information about how organisational activities impacts on them, even if they choose non to utilize the information, and even if they can non straight play a constructive function in the endurance of the organisation ( Deegan, 2000 ) . Harmonizing to ( Donaldson and Preston, 1995 ) stakeholder theory argues that every legitimate individual or group take parting in the activities of a house do so to obtain benefits for all stakeholders and companies as good. The stakeholder position maintains that houses have stakeholders instead than merely stockholders to account for. The groups that have a “ interest ” in the house include stockholders, employees, clients, providers, loaners, the authorities and society. Therefore, under this theory, organisations should unwrap rational capital information for the benefits of their stakeholders.
Another theory that supports the rational capital revelation is legitimacy theory. This theory closely linked to stakeholder theory. Under this theory, it hypothesizes that organisations will guarantee that they operate within the bounds and criterions of the societies they are in ( Guthrie et al. , 2004 ) . By following a legitimacy theory, a company would voluntarily describe on activities if direction perceived that the peculiar activities were expected by the communities in which it operates ( Deegan, 2000 ) .Hence, this theory promote the organisation to voluntarily unwrap rational capital information for the benefits of society.
Previous survey has been conducted in look intoing the cardinal drivers or determiners of voluntary rational capital revelation in biotechnology companies in Australia.
The survey conducted by ( Gregory White, Alina Lee and Greg Tower, 2007 ) found that the cardinal drivers such as board independency, degree of purchase and house size had important relationship with the degree of voluntary rational capital revelation among biotechnology companies in Australia.
Another survey conducted by ( Alexander Bruggen, 2009 ) examines the determiners which are act uponing Australian houses in doing determination to unwrap rational capital in their one-year studies. The consequence found that, industry type plays a cardinal function as a determiner for the revelation of rational belongings in one-year studies. In add-on, house size is another determiner for rational revelation of Australian houses. In contrast with earlier surveies and theoretical anticipations of voluntary revelation, nevertheless, this survey does non happen any relationship between the degree of information dissymmetry with rational capital revelation among the Australian houses.
Degree of board independency
The monitoring ability of the board will depend on its single members ‘ ability to stand for the stockholders by measuring house activities and commanding the behaviour of house directors. The per centum of independent managers on the board and the size of the board have both been positively associated with mensural degrees of revelation in past surveies ( Cravens and Wallace, 2001 ; Jaggi and Leung, 2004 ) .
Bukh et Al. ( 2005 ) place that company age has frequently been used in old surveies as a placeholder for hazard. From this position it might be expected that younger companies with “ less history ” will be more reliant upon non-financial revelations.
In other words, prospective information about net incomes will be more utile than limited historical information for investors to value the house ( Amir and Lev, 1996 ) . In Bukh ‘s survey above, they did non happen that age was an explanatory factor for house rational capital revelations.
Degree of purchase
Traditional bureau theory besides predicts that extremely leveraged houses that have important duties under bing debt compacts incur supervising costs to make equilibrium between self-interested directors as agents for external debt-holders ( Dhaliwal et al. , 1982 ) . The paper of Watts and Zimmerman ( 1986 ) further explains that the more external funding that is employed by an organisation the more direction will try to utilize different policies for their ain benefit. While Singh and Van der Zahn ( n.d. ) find there is a important positive correlativity between oil and gas house purchase and rational capital revelation they besides review two other documents with contrary consequences. A positive correlativity between steadfast purchase and voluntary section revelations was found by Bradbury ( 1992 ) . No relationship was found between the same two variables measured in New Zealand houses ( Chow and Wong-Boren, 1987 ) .
Large companies are frequently scrutinized by peculiar stakeholder groups, and hence positive revelation patterns such as rational capital revelation might be predicted if a house is trying to minimise political costs. The survey conducted by ( Gregory White, Alina Lee and Greg Tower, 2007 ) uses market capitalisation as a placeholder for political visibleness. ( Singh and Van der Zahn, n.d. ) found that, work on Australian oil and gas industry companies has shown that size is a important factor impacting voluntary rational capital revelation.
However, for Danish IPO prospectuses size was non a determiner for rational capital revelation ( Bukh et al.,2005 ) . Bukh and others identify an earlier survey by Robb et Al. ( 2001 ) that found prospective and historical non-financial revelations in the one-year studies were affected by size and international operations. Besides that, Bozzolan et Al. ( 2003 ) look into the one-year studies of 30 nonfinancial companies listed in the Italian Stock Exchange in 2001. Adopting Guthrie and Petty ‘s ( 2000 ) model with some alterations, they conclude that company size and industry influence the sum of rational capital revelation in Italian companies.
RESEARCH DESIGN AND METHODOLOGY
The first subdivision of this chapter discusses the conceptual model followed by hypotheses development, variables measuring and instrumentality informations aggregation and information analysis.
Conceptual model and hypotheses development
In a “ knowledge-based ” economic system, the beginning of companies ‘ economic value no longer depends on the production of material goods but on the creative activity and use of rational capital ( Guthrie et al. , 2004 ) . There are several grounds for houses to unwrap information on rational capital. The grounds or factors impacting steadfast revelation were identified through bureau theory. Traditional accounting revelation documents focus about entirely on explicating research hypotheses within an bureau theory conceptual model, with its overarching subjects of ownership, control, bureau, self-interest and cost. This is an wholly appropriate theoretical model within which to develop the current set of hypotheses. Agency theory is likely the cardinal theory to all of accounting theories. This theory explains that separation of ownership and control in companies creates a moral jeopardy where directors act as agents for stockholder proprietors, act for their ain economic opportunism ( Jensen and Meckling, 1976 ) . Positive accounting theory ( PAT ) is the subdivision of accounting theory that attempts to explicate the director agent ‘s behaviour and accounting policy pick determinations, sing the economic effects of peculiar determinations, with respect to incentive and honor strategies put in topographic point to actuate and honor them ( Deegan, 2005 ; Watts and Zimmerman, 1986 ; Zeff, 1978 ) . In the altering planetary coverage environment today, directors should understand and turn to the of import economic effects of non doing voluntary revelations about the house ‘s rational capital base.
3.2 Hypotheses development
3.2.1 Level of board independency
( Cravens and Wallace, 2001 ; Jaggi and Leung, 2004 ) found that the per centum of independent managers on the board and the size of the board have both been positively associated with degrees of voluntary revelation. The survey conducted by ( Gregory White, Alina Lee and Greg Tower, 2007 ) found that degree of board independency had important relationship with the degree of voluntary rational capital revelation among biotechnology companies in Australia.
H1: There is a important positive relationship between degree of board independency and degree of voluntary rational capital revelation.
In Bukh ‘s et.al ( 2005 ) found that, there is no important relationship between house age and house rational capital revelations. The survey conducted by ( Gregory White, Alina Lee and Greg Tower, 2007 ) found that there is no important relationship between house age with the degree of voluntary rational capital revelation among biotechnology companies in Australia.
H2: There is no important relationship between house age and degree of voluntary rational capital revelation.
Degree of purchase
Singh and Van der Zahn ( n.d. ) found that, there is a important positive correlativity between oil and gas house purchase and rational capital revelation. A positive correlativity between steadfast purchase and voluntary section revelations besides was found by Bradbury ( 1992 ) .
However, no relationship was found between the same two variables measured in New Zealand houses by ( Chow and Wong-Boren, 1987 ) .The survey conducted by ( Gregory White, Alina Lee and Greg Tower, 2007 ) found that degree of purchase had important relationship with the degree of voluntary rational capital revelation among biotechnology companies in Australia.
H3: There is a important positive relationship between degree of purchase and degree of voluntary rational capital revelation.
( Singh and Van der Zahn, n.d. ) found that, Australian oil and gas industry companies has shown that size is a important factor impacting voluntary rational capital revelation. However, for Danish IPO prospectuses size was non a determiner for rational capital revelation ( Bukh et al.,2005 ) . Bukh and others identify an earlier survey by Robb et Al. ( 2001 ) that found prospective and historical non-financial revelations in the one-year studies were affected by size and international operations. Besides that, Bozzolan et Al. ( 2003 ) look into the one-year studies of 30 nonfinancial companies listed in the Italian Stock Exchange in 2001. Adopting Guthrie and Petty ‘s ( 2000 ) model with some alterations, they conclude that company size and industry influence the sum of rational capital revelation in Italian companies. The survey conducted by ( Gregory White, Alina Lee and Greg Tower, 2007 ) found that house size had important relationship with the degree of voluntary rational capital revelation among biotechnology companies in Australia.
H4: There is a important positive relationship between house size and degree of voluntary rational capital revelation.
Degree of Intellectual Capital Disclosure
Degree of board independency
Degree of purchase
Figure 3.1 Determinants of degree rational capital revelation
Variable measuring and instrumentality
Measurement for Intellectual Capital Disclosure ( Dependent variable )
In order to mensurate rational capital revelation ( dependent variable ) , I decided to utilize a 78-item revelation index developed by Bukh et Al. ( 2005 ) . The revelation index is a method of hiting peculiar information disclosures utilizing either 1 for “ yes ” or 0 for “ no ” for each point. This categorical record is so converted into a per centum index of revelation for each company by spliting the amount of revelations by the denominator of entire points measured. In the publication by Bukh et Al. ( 2005 ) rational capital revelations are divided into six classs. They are employee, client, information engineering, processes, research and development and strategic statement which are scored from 27, 14, 5, 8, 9 and 15 single points, severally ( entire of 78 single points ) .
Measurement for Independence, Age, Leverage and Size ( Independent variables )
The factors which are traveling to be study in impacting rational capital revelation among public listed houses in Malaysia state are degree of board independency, house age, degree of steadfast purchase and house size.
Independence – The independency of the board of managers of the populace listed Malayan companies was measured by the figure of independent managers on the board in the 2009 fiscal twelvemonth as a per centum of the entire figure of managers of the company. This information was available from the compulsory one-year study revelation required by the Malayan criterion or Malayan ordinances organic structures such as MIA and FRS criterion.
Age – The age of the companies were measured in months from the day of the month of incorporation to the terminal of the 2009 fiscal twelvemonth. Most of the Malayan companies choose the day of the month for annually ended was 30 June 2009 or 31 December 2009.
Leverage – The degree of external funding of the companies was measured by the ratio of entire liabilities over entire assets at the terminal of the 2009 fiscal twelvemonth.
Size – There is no unequivocal step of political visibleness, but size has been used as a placeholder for political visibleness in a figure of empirical surveies, and steps of size which have been applied include entire assets or entire gross revenues. Hence, I decided to mensurate the size of the company based on entire plus of the company.
In this survey, the population frame will include all the public listed companies in Kuala Lumpur Stock Exchange ( KLSE ) . Harmonizing to KLSE, there were 841 companies listed in the chief board of KLSE as at 7 November 2009. Therefore, the population frame of this survey will be based on all the listed 108 companies.
A 50 sample was selected from all the listed companies in chief board in the Kuala Lumpur Stock Exchange. The sample was selected utilizing simple random trying from all the difference sectors including industrial sectors, service sectors, agricultural sectors and building sectors. This technique assures that each of the companies in the population has an equal opportunity of being selected.
In this survey, informations will be collected through secondary informations, where the information will be taken from the bing beginnings such as one-year studies from the companies. While seeking for secondary informations, it will salvage clip and costs of geting information. These beginnings of secondary informations provide a batch of information for research and job resolution ( Sekaran, 2003 ) . Using the cyberspace Netscape Navigator to transport out the survey, a study of the companies ‘ web sites or place pages was conducted in order to cognize the companies entire assets and their profitableness. Besides, the research worker has letters sent out to those companies where the web sites could non be found straight through the cyberspace. The letters were designed to happen out whether the companies have web sites on the cyberspace and their web sites references.
In order to transport out this survey, I plan to utilize content analysis for the intent to size up the rational capital coverage patterns of the public listed houses in Malaysia. Then, in order to prove the relationship between dependant variable and independent variables, I will utilize correlativity and the multiple-regression analysis.