Intellectual capital disclosure on institutional investors’ ownership concentration: empirical evidence from the European capital market

Purpose Despite today’s prominent role of intellectual capital (IC), its relationship with companies’ ownership structures remains underexplored. Henceforth, this research examines whether IC disclosure, categorized as human, structural and relational capital, is associated with ownership concentration (OC) among both short- and long-term focused institutional investors. Design/methodology/approach The research retrieves data from LSEG Data and Analytics. The sample is composed of 330 companies headquartered in Europe, gathering observations over a 4 year period. This research utilizes fixed-effects regression analysis, and it tests the validity of its results through various robustness checks. Findings The empirical findings reveal significant relationships between IC disclosure and institutional investors’ OC. Specifically, short-term institutional ownership negatively affects companies’ IC disclosure, whereas long-term institutional ownership positively influences it. These findings underscore the role of ownership time horizons in shaping businesses’ IC transparency and initiatives. Practical implications This research contributes to the development of regulations aimed at enhancing the disclosure of IC and intangible assets, thereby reducing potential information asymmetries between book and market values and providing insights for institutional investors and policymakers. Originality/value National and supranational institutions and standard setters have recently introduced significant regulatory changes to better reflect the role of intangibles and IC disclosure in financial statements. The objective is to move beyond the limitations imposed by current accounting standards on their recognition. Accordingly, this research seeks to address these novelties by proposing a scoring system for measuring IC disclosure and analyzing its relationship with institutional investors’ OC.