EFFECTS OF INTELLECTUAL CAPITAL INFORMATION DISCLOSURE ON MARKET CAPITALIZATION: EVIDENCE FROM PAKISTAN

Abstract

This study has been conducted to determine the effects of intellectual capital
information disclosed in annual reports on market capitalization of the KSE-listed
companies. The current study is the first of its kind in the context of Pakistan. We hereby
tested the effects of IC information disclosure against the Market Capitalization of
selected firms along with other explanatory variables with well-established and long
standing economic theory. Utilizing panel data for three years for a sample of 30 listed
companies on KSE-100 Index under the panel regression model along with Fixed
Effects and Random Effects over the period of 2010-2012. The findings from this study
are very promising and conclude that in the case of Pakistan IC information disclosure
does significantly and positively affect the market capitalization of the firms under
consideration. Hence it is imperative for the firms to disclose maximum IC information
to the general public to boost and obtain more friendly investor confidence which will be
observed in the form of high prices and resultantly higher market capitalization
accordingly.