Corporate governance mechanisms and intellectual capital.

AutorTejedo-Romero, Francisca
CargoTexto en ingles - Ensayo

1 Introduction

Knowledge can be identified as a business asset (Sveiby, 1997; Tejedo-Romero & Araujo, 2016) that has become a key economic resource and the main competitive advantage (Brooking, 1997; Rodrigues, Tejedo-Romero & Craig, 2017). Knowledge can have different origins such as people, the organization, technology and the market or socio-economic environment, forming what is called "Intellectual Capital" (IC) (European Commission, 2006). Many researchers argue that IC significantly increases a company's value (Bukh, Nielsen, Gormsen, & Mouritsen, 2005; Rodrigues et al., 2017; Tejedo-Romero, & Alfaro-Cortes, 2014; Yi & Davey, 2010).

However, financial statements have ceased to be explanatory about the business reality on which they intend to report, since the identification, measurement and valuation criteria do not respond to the characteristics of knowledge economy (Beattie, 2005; TejedoRomero & Araujo, 2016). Many stakeholders are at a disadvantage in terms of information access and are forced to heavily rely on voluntary IC disclosure for their decision-making (Rodrigues et al., 2017; Vergauwen, Bollen & Oirbans, 2007). Thus, the purpose of IC disclosure should be to: a) provide relevant and quality information so that stakeholders can make efficient decisions (Abeysekera & Guthrie, 2005; Tejedo-Romero, & Alfaro-Cortes, 2014); b) reduce the asymmetries of information and improve relationships with stakeholders (Guthrie & Petty, 2000; Rodrigues et al., 2017); c) improve transparency between companies' managers and owners and other stakeholders (Vergauwen, et al., 2007; Yi & Davey, 2010); d) reduce the gap between the book value and the market value of the company (GarciaMeca, Parra, Larran & Martinez, 2005); and e) create trust and reputation among stakeholders (Tejedo-Romero, 2016, Vergauwen, et al., 2007).

Companies are becoming aware of the importance of disclosing voluntary information (Bukh et al., 2005; Tejedo-Romero & Araujo, 2016; Yi & Davey, 2010), and it is Good Corporate Governance (henceforth CG) that should provide the mechanisms necessary to increasing the degree and the quality of transparency. As Garcia Osma and Gill de Albornoz (2007) point out, the influence that the company's management can exert on the quality of information is framed within the context of the agency problem that originates from the separation between ownership and company control (Jensen & Meckling, 1976). This generates the presence of asymmetries between the principal (shareholders and other stakeholders) and the agent (managers/directors), in which the agent can use his power to achieve his own benefit against the interests of the principal (Jensen & Meckling, 1976). This has led to the use of good governance codes in most countries, establishing rules and recommendations that allow companies to adopt norms on the supervision of managers, aimed at reducing information asymmetries between shareholders and other stakeholders.

Few studies have attempted to establish relationships between IC disclosure, ownership structure and CG (Abeysekera, 2010; Cerbioni & Parbonetti, 2007; Hidalgo, Garcia-Meca, & Martinez, 2011; Li, Pike, & Haniffa, 2008; Rodrigues et al., 2017). Institutional and legal differences in individual countries, in particular their ownership structure and CG system (unitary or dual), can lead to significant variations in governance models and revealed information. On the other hand, we should note that studies carried out so far, such as the pioneering work by Cerbioni and Parbonetti (2007), point out a number of limitations that could be overcome by future research, such as extending the period of study, examining companies from different sectors and analyzing different institutional and legal contexts. This work tries to surmount these limitations, facing the scarcity of studies in Spain that examine the influence that ownership structure and GC characteristics of listed Spanish companies have on IC disclosure.

Spain offers an interesting framework for studying the effectiveness of the mechanisms of good governance in the disclosure of IC information, for several reasons: a) the legal protection of shareholders there is lower than in Anglo-Saxon markets (Gisbert & Navallas, 2013), mainly of minority shareholders (Pucheta-Martinez, 2015); b) Spanish capital markets are less developed than the United States', Great Britain's and even Asian countries' markets (Fernandez-Mendez & Arrondo-Garcia, 2007; Pucheta-Martinez, 2015); c) the requirement for all listed companies, through Law 26/2003 of July 17, of having a website to provide relevant information and prepare a corporate governance report (Gisbert & Navallas, 2013; Tejedo-Romero & Araujo, 2016); d) the relevant role that the Board of Directors (henceforth BD) acquires in unitary or monist government systems (one-tier-system), as it is in charge of the control and supervision of the company's management team, promoting active participation in strategic decision-making (Acero Fraile, & Alcalde Fradejas, 2010; Garcia-Sanchez, Rodriguez Dominguez, & Gallego Alvarez, 2011); and e) the existence of a highly concentrated ownership structure (Garcia Osma & Gill de Albornoz, 2007; Gisbert & Navallas, 2013), in which institutional directors have a significant influence on Spanish BDs (Pucheta-Martinez & Garcia-Meca, 2014); because in Spain, in addition to executive or internal directors (insider), who hold a managerial position in the company and are directly involved in management, non-executive or outsider directors are considered as: Institutional Directors, which represent the interests of shareholder groups capable of influencing the control of the company (majority shareholders); independent directors, who are not connected either to the management team or to the control groups, but are selected for their high professional training and are responsible for ensuring the interests of minority shareholders; and other outsider directors (Law 31/2014, article 529).

This paper aims to identify the characteristics of Spanish Ibex35 companies' CG that affect the policy of IC disclosure. These companies are the ones that make up the bulk of capital movements in the Spanish stock market. In addition, they are a reference, since, for the development of the first CG code (Olivencia Report), they were the target of a survey to understand the structure of shareholders and Boards of Directors in listed Spanish companies. For the analysis of the data, a regression model is used for balanced panel data, using the Hausman-Taylor estimator to solve the endogeneity problem of variables. The results suggest that the ownership structure and certain characteristics of the BD, such as the number of directors, the role of independent directors and the separation of the roles of BD chairman and CEO, play an important role in the decision to disclose IC.

From the perspective of agency-stakeholder theory, our research contributes in various ways to existing literature on the discussion of CG mechanisms that affect IC disclosure in agency relationships. First, it provides evidence to limited research in the Spanish context regarding the influence that CG has on IC disclosure. In particular, it enhances the knowledge of the determinants for IC disclosure in a non-Anglo-Saxon capital market, characterized by an ownership structure concentrated in large shareholders and by the strong power the executive directors have, due to the scarce separation of powers between the roles of the chairman of the BD and CEO. In addition, it highlights the lack of effectiveness of independent BDs as a control mechanism contributing to safeguard the interests of minority shareholders and other stakeholders. Secondly, it is a longitudinal study that covers a period of five years, extending previous work which only analysis one or two years in Spain (Garcia-Meca et al., 2005; Macagnan, 2009; Monclus Guitart, Rodriguez Merayo, & Torres Coronas, 2006; Oliveras, Gowthorpe, Kasperskaya, & Perramon, 2008), except for the research of Alcaniz, Gomez-Bezares and Ugarte (2015), which covers the period between 1996 and 2007. thirdly, the use of panel data methodology, which has not been widely used in IC studies, improves the efficiency of econometric estimates by capturing unobservable heterogeneity (Baltagi, 2014; Wooldridge, 2010). Finally, the endogeneity problem of CG variables is also addressed; this has its origins in the causal relationship between these variables and corporate disclosure (Gul & Leung, 2004) by using the Hausman-Taylor estimator.

2 Theoretical framework and development of hypotheses

2.1 Spanish regulation and context

A Committee of Experts was created to analyze the accounting situation in Spain and how to approach the adaptation of the Spanish accounting system to international accounting standards. The result of the work was the well-known "ElLibro Blanco de la Contabilidad" (ICAC, 2002). This document highlighted the relevance of IC and recommended the development of indicators that reflect the status of intangible elements that are part of the corporate patrimony, as well as disclosure and standardization among companies that voluntarily want to use them in their financial information, through IC reports or within sections of the Annual Report (Instituto de Contabilidad y Auditoria de Cuentas [ICAC], 2002), since the latter is the main corporate communication channel of the companies' activities and future intentions (Abeysekera & Guthrie, 2005; Tejedo Romero & Araujo, 2016).

In Spain, most of the research that studies IC voluntary information has analyzed annual reports (Macagnan, 2009; Monclus et al., 2006; Oliveras et al., 2008). Alcaniz et al. (2015) explored the Initial Public Offerings' (IPOs) prospectuses, and Garcia-Meca et al. (2005) focused on examining reports issued by financial analysts, while, according to Tejedo-Romero and Araujo (2016), the levels...

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