| Summary: | While the traditional accounting model is widely believed to inadequately
account for intangibles, managers can voluntarily provide information about them.
Based on a sample of companies from East Asia, this thesis investigates the role of
voluntary non-financial disclosure about intangibles in a valuation context. Given the
proprietary nature of intangibles, the value of the information may not be perceived to
be useful by investors.
First, this thesis examines the relationship between voluntary disclosure of
intangibles and market value. Consistent with the capital market incentives argument,
the evidence shows that voluntary disclosure of intangibles contains value relevant
information. Second, this thesis investigates the effect of managerial ownership on the
value relevance of voluntary disclosure of intangibles. The results show that the value
relevance of intangibles is lower in companies with high managerial ownership,
supporting the view that high managerial ownership is associated with greater levels
of entrenchment. Third, this thesis analyzes the effect of institutional environments on
the disclosure of information about intangibles and the subsequent valuation of that
information. At comparable levels of managerial ownership, the value relevance of
intangibles is greater for companies in countries that have strong institutional
environments. This evidence is consistent with strong legal institutions having a
positive effect on financial reporting and corporate valuation.
Overall, the findings suggest that a strategy of voluntary disclosure could be
beneficial in resolving information asymmetry surrounding intangibles. In addition,
the effectiveness of voluntary disclosure of intangibles is conditional on the internal
corporate governance infrastructure and the external legal environment.
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