The Impact of Firm Size, Leverage, and Profitability on the Disclosure Level of Intellectual Capital

Abstract

The transformation of the economy from a production-based economy to a knowledge economy has increased the relevance of Intellectual Capital (IC). With the emergence of the Integrated reporting framework, the corporates have started reporting intellectual capital in annual reports, business responsibility reports. The present study aims to examine the relationship between the IC disclosure (ICD) and variables like Firm Size, Leverage, and Company Profitability. To find the relationship, a sample of 30 Bombay stock exchange-listed non-financial firms have been taken into consideration for three years, 2018–2020. The study concludes that firm size positively impacts the disclosure of IC. It can be inferred that the medium and small firms will not disclose much information related to Intellectual capital than large corporations. However, leverage negatively affects the disclosure of IC. It is rightly supported as higher the leverage; low disclosure will be there as investors wouldn’t be willing to invest in the organization. To attract investments, organizations wouldn’t disclosure the debt level. There is no influence of profitability on the ICD. The authors believe that the government should spread awareness about the disclosure of Intellectual Capital at the macro level and train the employees and management at all levels and sizes to increase the disclosure level.