How does Intellectual Capital Disclosure Affect the cost of Capital? Conclusions from two Decades of Research


  • Łukasz Bryl
  • Justyna Fijałkowska


intellectual capital disclosure, intellectual capital reporting, cost of capital, cost of debt, cost of equity, literature review


According to Dumay (2012), there are two grand foundations of intellectual capital (IC) disclosure theory: the MV/BV ratio and greater profitability because of the lower cost of capital. Consequently, the purpose of this paper is to perform a literature review of the empirical studies conducted in the last 22 years on the link between intellectual capital disclosure and the cost of capital (cost of equity and cost of debt). The findings of empirical research analysed in this paper indicate that the hybridization of financial and non‑financial data reporting contributes to the lower cost of capital. Moreover, in general, researched studies confirm a negative relation between the non‑financial information disclosure and the cost of equity. IC data disclosure also improves credit rating and thus lowers the cost of debt. In terms of IC sub‑categories, disclosure of human capital items performs the strongest impact on decreasing the cost of equity. The Corporate Social Responsibility (CSR)/ (Environmental, Social and Corporate Governance (ESG) reports (43%) and annual reports (39%) were the most often utilized IC data sources, followed by corporate websites disclosures (15%). A minority of the studies (4%) used integrated reports, IPO prospectuses, and reports dedicated solely to the IC. This paper has a twofold contribution: first, it provides a valuable insight for regulators, practitioners and stock market analysts into the role of IC disclosure in the reduction of the cost of capital. Second, it attempts to revive the discussion on the relevance of IC reporting by the entities in terms of minimalizing their cost of capital.



1 Jan 2020