Improving the information environment for analysts: Which intellectual capital disclosures matter the most?

Purpose: The purpose of this paper is to document the relationship between intellectual capital disclosure and analyst following for biotechnology firms listed at the Copenhagen Stock Exchange during the period between 2001 and 2010.
Design/methodology/approach: Intellectual capital disclosure was computed from financial statements, while analyst following data was retrieved from I/B/E/S.
Findings: The results show that analysts are more likely to follow firms with high intellectual capital disclosure. This finding is consistent with the fact that analysts wish to follow those firms for which they have more information. Our results also show that intellectual capital disclosure related to employees and strategic statements are the most important disclosures for analysts.
Research limitations/implications: More relevant methods, such as survey or interviews with management, may be used to improve the information content of intellectual capital disclosure. Analysts, probably, deduce intellectual capital of a firm from interaction with management rather than financial statements.
Practical implications: Firms in biotechnology sector can improve their information environment by disclosing more information regarding their intellectual capital in financial statements.
Originality/value: Our findings shed light on the importance of intellectual capital in biotechnology sector for analysts.