The IC disclosure in Italian Universities and its determinants

In recent years the transition from an “industrial economy” to a “new-Knowledge economy” has brought to light the importance of Intellectual Capital (IC), as a crucial factor for the firms’ value creation and the achievement of a sustainable competitive advantage (Williams, 2001; Chen et al., 2005; Lev et al., 2005; Li et al., 2008). The relevance of IC has also emerged in the public sector, already influenced by the reform process which implied a greater strategic and operational autonomy for public organizations (New Public Management). In particular in higher education sector Universities are considered as “critical players in the knowledge-based society” (Secundo et al., 2015:419) since they are devoted to the production and diffusion of knowledge, investing basically in in research and human resources. (Sanchez and Elena, 2006). These economic and political changes have required Universities to develop new IC measurement and reporting models, with the emphasis on the role of voluntary disclosure in order to respond to the growing demand for transparency regarding the use of public funds and the outcomes achieved in terms of research and teaching (Ramirez et al., 2007; Bezhani, 2010). However, IC reporting research is still focused primarily on the private sector. Studies about University IC reporting are just beginning to emerge (Bezhani, 2010; Low et al., 2015; Secundo et al., 2015). However few of them discuss the explanatory factors of the levels and types of IC disclosure. Thus, the present research, grounded on several theories (Stakeholder Theory, Agency Theory, Signalling Theory and Resource Dependence Theory) aims to contribute to this new strand of research by pursuing two objectives: 1. To investigate the level of IC disclosure of 61 Italian Sate universities, applying the content analysis method to the 2014 annual reports with an un-weighted Disclosure Index based on the theoretical framework developed by Low et al. (2015); 2. To test, through a linear regression model, the relationship existing between six explanatory factors (Size, age, financial independence, financial performance, board size and board independence) determined according to the aforementioned theories and previous research and the level of IC disclosure represented by the Disclosure Index. The results of Content Analysis show a medium Intellectual Capital Disclosure Index (0.52 out of 1). Moreover, consistent with the results of Low et al. (2015) the IC categories most disclosed are Internal Capital (42.14%) and Human Capital (34.74%). Therefore, the regression analysis results show that both the size and the board independence positively affects the level of IC disclosure. However, no significant statistical relationship has emerged between the other four potential explanatory factors and the level of IC disclosure. The paper represents an innovative contribution to the existing literature, being the first study providing empirical evidence on the explanatory factors influencing the level of IC Disclosure in Italian Public Universities. Moreover, this research may have important implications for researchers who can use the theoretical framework adapted from Low et al. (2015) as a comparative basis in order to replicate this analysis in other countries. Additionally, University managers, board members and regulators can gather usefulness information in the aim of increasing and improving the IC reporting, enhancing the transparency to the external stakeholders. However, this study has also some limitations which need to be overcame in the future: first, this research considers only a single financial year (2014), so it does not capture the IC reporting trends over the time. Second, Italian State Universities still adopt different accounting systems (cash and accrual accounting), so a replication of the research is highly advisable as soon as a real accounting harmonization is achieved. Third, while an un-weighted disclosure Index has been adopted in this study, future research in IC reporting might adopt different methodologies.