Factors Affecting Intellectual Capital Disclosures: A Case of Primary Sectors in Thailand

The aim of this paper is to explore the quality of Intellectual Capital Disclosure (ICD) in the modern economic era. Using the data from both agricultural sector and resources sector listed in The Stock Exchange of Thailand (SET) between 2013-2017 (15 companies each), the study finds that firm size has an influence on all aspects of ICD (Human Capital Disclosure, Internal Capital Disclosure, and External Capital Disclosure). Meanwhile, profitability affects Human Capital Disclosure and Internal Capital Disclosure. As a contribution to previous researches, the findings support the view in which information asymmetry has a positive relationship with External Capital Disclosure. Furthermore, it finds that market share has a significant influence on the quality of Human Capital Disclosure and Intellectual Capital Disclosure. Since the study applies content analysis which investigates companies' annual reports according to ICD terms used in the reports, there is a possibility that the quality of ICD will not be wholly captured. In addition, firms may use other sources of information to communicate their ICD. To sum up, this paper assists in giving some insight about the quality of ICD in Thailand, especially agricultural sector and resource sector, as well as trying to inspect other factors related to ICD that was rarely used in previous research, such as market share.


Introduction
Intellectual Capital (IC) grows rapidly as a hidden value of a business. A firm's value does not lie only in its physical assets, but also on its database, human competence, firm performance, or any other intangible asset (Huang et al., 2010). The world's economic continuous development is currently pushed by the basis of utilization of knowledge and business innovation, while also identifying needs of IC (Kianto et al., 2014;. The recognition of intangible assets such as research and development, copyright, license, trademark, patent, product portfolio, and technology, has become the basis for the emergence of IC in financial reporting disclosure as a whole (Joshi et al., 2018). Many of the current research frameworks have started moving towards the matter of human abilities and skills. This means there are various studies of intellectual capital, done either conceptually (Eddine at al., 2015) or empirically.
Several empirical studies have tried measuring the factors that affect the creation of intellectual capital in an organization; whether in the shape of value-added capital as suggested by Pulic in 1998(Al-Musali & Ismail, 2015Appuhami & Bhuyan, 2015;Hatane et al., 2017;Nadeem et al., 2017) or as the disclosure of intellectual capital activities (Ousama et al., 2012;Mondal & Ghosh, 2014;Morariu, 2014;Abhayawansah & Azim, 2014;Kamath, 2017). This has become a challenge for further researchers who want to expand on the topic of intellectual capital.
Firm's knowledge and reputation, skills, experience, loyalty, and employee's commitment are several non-financial information related to intellectual capital activities that firms must communicate to stakeholders. This may become a challenge for companies as this information have no clearly defined standard of presentation and measurement (Branco et al., 2011). Meanwhile, said non-financial information are also points of consideration for stakeholders in making firm-related decisions. Guthrie et al. in their study of intellectual capital disclosure (ICD) in 2012 developed the framework in order to expand ICD's components. They classify the source of intangible assets into three parts, and while they may have different terms, are generally divided into the internal structure commonly known as structural capital, the external structure called relational capital, and human resources (Edvinsson, 2013;Curado et al., 2014). This study will use the same IC classification categories as the previous studies to earn a comparable empirical result. IC classification used are human capital disclosure (HCD), internal capital disclosure (InCD), and external capital disclosure (ECD).
Human Capital (HC) is a set of skill or expertise, knowledge, or other intangible assets of an individual, that may be used to create economic value an individual, employee, or community. The most important thing in human capital is education, which becomes a firm's investment. Internal Capital (InC) is the supporting infrastructure for a firm to do its operational activities. Internal Capital is also known as Structural Capital. This particular capital is firm-owned and will stay inside the firm even when employees leave it. External Capital (EC) concerns how a firm relates to its external parties, including among other things, customers, competitors, government, public, firm's reputation, and trademark (Guthrie et al., 2012).
Previous studies have analyzed the determinant of IC disclosure. Generally, ICD is significantly affected by size, industry type, profitability, and leverage. This research will add market share as a relatively new variable in ICD studies. Branco et al. (2011) state that firm size measured with market capitalization is a significant impetus of ICD; this result supports the study of Taliyang et al. (2011). Inversely, Huang et al. (2010) find that firm size does not significantly affect ICD in several companies across Malaysia. Morariu (2014) describes that industry type is not a determinant factor of ICD in Romanian firms, while Kamath (2017) instead states that industry type is a determinant. On profitability, research by Haji & Ghazali (2013) shows that there is a correlation between profitability and ICD at a significant level of one percent. Meanwhile, Atan & Rahim (2012) do not find any significant relationship between profitability and ICD. Likewise, different results are present between the studies by Rashid et al. (2012), Oliveira et al. (2013), Haji & Ghazali (2013), and Whiting & Woodcock's research which finds that leverage is not significantly related with ICD. Other than using size, market share, profitability, and leverage as variables, this study also tries to measure the role of information asymmetry in IC disclosure, as done by Bruggen et al. (2009) andOrens et al. (2009).
The study uses data from 30 companies in agriculture and resources sectors between 2013-2017, which are listed in the Stock Exchange of Thailand (SET). This period is chosen as it is the start of ASEAN Economic Community, that is, the start of free-trade between ASEAN countries. As a leading agrarian nation in South East Asia, the agricultural sector is expected to be the main livelihood of Thais. The agricultural sector, comprised mostly of small-scale farms, contributes only 10% of GDP but employs about one-third of the labor force (Forbes, 2017). Natural resources are also a developing sector in Thailand; this includes the mining sector with lead being the main result.
This research finds that size, ROA, and information asymmetry has a positive effect on ICD, while market share negatively affects ICD. The result is different from the previous study by Bruggen et al. (2009) which finds that there is no relationship between information asymmetry and ICD. This study contributes to adding ICD research in various countries while also answering the question of what factors affect IC disclosure activity.

Literature Review
IC investment keeps increasing and has currently reached the highest level in the world (OECD, 2013). In this era of knowledge, IC has become the center of new economic growth as the role of intangible assets more prominent compared to fixed assets and financial assets. Even more, specialists support the notion that IC is an important element in reaching an organization's optimal performance (Sydler et al., 2014). However, not all firms consistently disclose it. According to An et al. (2011), there are three factors that motivate a firm to disclose IC. First, it is to reduce information asymmetry between firm's management and various stakeholders in public; then to perform accountability to stakeholders, and finally to signal the legitimacy and advantage (and superiority) of the firm to the public.
Firms who acknowledge the importance of IC tend to invest on it and report it in their annual report to increase their competitive advantage and success Nimtrakoon, 2015). IC disclosure is also seen as an effective means for firms to reduce information asymmetry and to increase their relationship with various stakeholders (Vergauwen et al., 2007;Yi & Davey, 2010).
Several factors determine the quality of IC disclosure. Bruggen et al. (2009) in a study in Australia find that industry type significantly affects IC disclosure. Eddine et al. (2015) reveal that firm size, profitability, and industry type have positive relationships with ICD. In Malaysia, Ousama et al. (2012) show that profitability is the key factor in ICD, while Taliyang et al. (2011) do not find any significant relationship between profitability and ICD. On a study by Huang et al. (2010), firm size does not significantly affect IC disclosure. Kamardin et al. (2017) report that leverage is significantly related to ICD; conversely, Whiting & Woodcock (2017) and Ferreira et al. (2012) recognize no significant relationship between leverage and ICD. Orens et al. (2009) find that leverage and ICD have a significant relationship but only in the Internal Capital disclosure component. A study by Bruggen et al. (2009) show that information asymmetry does not significantly affect ICD; however, on a study by Orens et al. (2009), information asymmetry significantly affects ICD. It may be said that, although using the same variables, the determinant in IC disclosure quality differs in each research.
Similarly, Abeysekera & Guthrie (2005) find a different proportion of IC categories (human capital, internal capital, and external capital) in Sri Lanka compared to Guthrie & Petty's findings in Australia. Human capital proportion reported on firms in the Sri Lankan study (36%) is higher than that in Australia (30%). Meanwhile, internal capital proportion reported in firms in Sri Lanka (20%) is lower than Australia's (30%). In this case, the study used the same framework but earned different results. The newest research is done by Wagiciengo & Belal (2012) in South Africa. This research surveyed the nature and the rate of IC disclosure on 20 South Africa firms between 2002-2006. The findings show that there is an increasing trend for IC disclosure in South Africa, with Human Capital becoming the most reported IC category. The difference in outcomes may happen as a result of the time difference, sample size, and a nation's rules and customs. Based on the above explanation, this research examines the firm size, market share, information asymmetry, profitability, and leverage as factors affecting the quality of IC disclosure in the agriculture and resources sectors in Thailand.
Stakeholder theory may become the basis of ICD-related information disclosure of a firm. A company will voluntarily report its activities if the management thought of this as something the community expects (Deegan, 2004). According to Harrison and Wicks (2013), stakeholder theory explains that a firm does not operate for its own interest only but should also be able to provide benefits for all stakeholders (shareholders, customers, society, government, suppliers, and all other parties who contribute to the company). Stakeholders hold a right to make management utilize all potential a firm has. This potential may be human capital, structural (internal) capital, and relational (external) capital which can add value for the company as it increases financial information while also increases stakeholders' trust towards the firm (Alcaniz et al., 2011).
Legitimacy theory supports ICD as it is closely related to stakeholder theory. Legitimacy theory is asserted on each organization and makes sure that they operate within boundaries and standard or other public norms where an organization is located (Deegan, 2000). Legitimacy theory helps a firm to analyze the content in IC disclosure (Kamath, 2017). By disclosing IC, a company gives out information related to its activities. Through the report, external parties or investors can assess if said company has applied norms and values that fit society's beliefs.

Firm Size
Based on studies by White et al. (2010), Branco et al. (2011), andFerreira et al. (2012), firm size is an important factor that affects IC disclosure. Large-scale firms naturally have bigger resources compared to smallerscaled firms, so that big firms are capable of funding IC disclosure. Additionally, big firms are respected and monitored by society and government, leading firms to provide more information including that related to IC. Firm size becomes the most used variable, and many studies find that there is a significant positive relationship between firm size and ICD (Morariu, 2014). The following hypotheses were made: H1a. Firm size affects the quality of human capital disclosure.
H1b. Firm size affects the quality of internal capital disclosure.
H1c. Firm size affects the quality of external capital disclosure.

Market Share
Market share is firm's strength in competing on any particular industry sector. Higher market share motivates firms to gain even more trust from external parties. Marisanti (2012) explains that a firm with a better reputation tend to reduce IC disclosure as they have already earned the public's trust and legitimacy. This research explores the effect of market share on IC disclosure, and the following hypotheses were made: H2a. Market share affects the quality of human capital disclosure.
H2b. Market share affects the quality of internal capital disclosure.
H2c. Market share affects the quality of external capital disclosure.

Information Asymmetry
Stakeholders' trust can be increased with the presence of IC disclosure. This is in line with Martini et al. (2016) who state that the existence of information such as external capital can increase a firm's legitimacy for its stakeholders. The establishment of trust is most important to ensure stakeholders' commitment to the company's future. Firms with higher IC disclosure are expected to have more committed and loyal customers and employees. Logically, agency problem which enables internal parties to take advantage of the situation by sacrificing external parties may occur if the firm fails to disclose IC information . Thus, ICD can reduce exploitation from internal parties and would finally reduce information asymmetry (Omar & Christian, 2014). The study on the relationship between information asymmetry with ICD has been done by Bruggen et al. (2009), who find that information asymmetry does not affect ICD, while Orens et al. (2009) revealed otherwise. Thus the following hypotheses were made: H3a. Information asymmetry affects the quality of human capital disclosure.
H3b. Information asymmetry affects the quality of internal capital disclosure.
H3c. Information asymmetry affects the quality of external capital disclosure.

ROA (Profitability)
Signaling theory can be used in explaining the relationship between ICD and firm profitability; where the higher the profit a firm makes, the more it gives the signal that it has better performance by providing more information on its IC. This argument is supported by Ousama et al. (2012) who study ICD in Malaysia, and by Haji & Ghazali (2013). Another reasoning is that with a higher profit margin, managers will be more motivated to give more detailed information, as this is related to the bonus they could receive. The following hypotheses were then made: H4a. Profitability affects the quality of human capital disclosure.
H4b. Profitability affects the quality of internal capital disclosure.
H4c. Profitability affects the quality of external capital disclosure.

Leverage
Higher leverage will drive external parties (e.g., creditors) to ask firms to disclose even more information, such as IC information. High debt means higher supervision, which can be done through published disclosure. Firms would want to assure external parties that firm value does not rely only on financial performance, but also other factors like intellectual capital. Rashid et al. (2012), Oliveira et al. (2013), and Kamardin et al. (2017) examine the relationship between leverage and ICD and find them to have a significant relationship. The following hypotheses were made: H5a. Leverage affects the quality of human capital disclosure.
H5b. Leverage affects the quality of internal capital disclosure.
H5c. Leverage affects the quality of external capital disclosure.

Samples
The study uses data from financial and annual reports between 2013-2017, from 30 companies in the agriculture and resources sector listed in Stock Exchange of Thailand (SET). The total population is 59 companies in the agricultural sector and 63 companies in the resources sector. The final sample is 15 agricultural companies and 15 resources companies. The completeness of financial reporting is also considered as part of sample selection. ICD is measured with an identifying scoring method based on each ICD classification. Finally, this study uses multiple regression panel data to examine IC disclosure.  Table 1 shows relevant terms related to IC used in this research. The following are ICD measurement components that have been identified according to the three criteria of ICD quality: human capital, internal capital, and external capital. The scoring of each criteria ranges from 0 to 3. A score of 0 represents no written disclosure of criteria in annual report, 1 means there is some disclosure on the criteria, 2 means there is some disclosure on the criteria backed with numerical data such as percentage or the amount of certain years, and 3 means there is disclosure on the criteria with nominal data in certain currency, in this case, Thai Baht (THB).

Independent Variables Measurement
-Firm Size (FSIZE) is measured with log Total Assets.
-Market Share (MSHARE) is measured by dividing the Total Firm Sales with Total Industry Sales.
-Information Asymmetry (INFASYM) is measured by the percentage of share ownership not owned by the top 10 major shareholders.
-Profitability (PROF) is measured with the Return on Assets (ROA) ratio.
-Leverage (LEV) is measured by dividing Total Debt with Total Equity.

Multiple Regression Model
The study uses multiple ordinary least square regression model (OLS), a model commonly used on ICD studies, for example by Huang et al. (2010). The calculation of OLS regression model is as follows: = + 1 + 2 + 3 + 4 + 5 + (1)

ICD Quality
Table 2 explains firms' average ICD quality from 2013-2017, measured with 0-3 scoring. Information disclosed regarding human capital tends to be just the general, unspecific data. As seen on the table, in the 1 st interval from 2013-2017, the average percentage of HCD is 55% from 30 companies. Both internal capital and external capital disclosure show similarities with human capital's, in that disclosure, is unspecific on interval 1 with an average percentage of 58% and 39%, respectively. Human capital and internal capital both have the minimum score in the 3 rd interval, each 7%, and 11%, while the minimum score of external capital is in the 2 nd interval with 11%. Thus it is concluded that most human capital, internal capital, and external capital disclosures by firm samples are explained in an unspecific term.  Table 3 result displays the first step in the multiple regression model, continued with a panel test model. The information contained in the table shows that the HCD and ECD model could not be tested with the pooled OLS model (p-value (F) > 0.05). All three models are free from heteroskedasticity as the significant value is > 0.05. Next, from Table 4 below it may be derived that this study is also free from collinearity since the VIF score of each independent variable is less than 10.   Author's compilation, Note. *, **, *** significant at 10, 5, and 1 percent levels, respectively From the outcome of the regression model above it can be concluded that firm size significantly affects all indicators of ICD; thus H1a, H1b, and H1c are accepted. The bigger the company leads to higher demand for information disclosure by related external parties, e.g. investors and government. Relatively higher resources push firms to disclose IC information in a more specified manner. This result supports previous studies such as White et al. (2010);Branco et al. (2011);Taliyang et al. (2011);Ousama et al. (2012);and Ferreira et al. (2012).

Multiple Regression Analysis
Market share reveals a significant relationship with ICD. Market share indicates a significant negative relationship on the component of human capital and internal capital, hence only H2a and H2b are accepted. In this study, market share is calculated using the percentage of total firm sales to total industry sales in the same industry. It is determined that there exists a relation with the confidence in firm achievement. Market share also shows a dominantly negative relationship with ICD. It is assumed that the management of an industry giant would have a good reputation and trust in the general public's eyes.
The above regression model also exhibits that information asymmetry significantly affect external capital, meaning only H3c is accepted with H3a and H3b being rejected. This shows that lower information asymmetry leads to more information being kept by the firm's internal parties, causing lower disclosure level to external parties. This result is contrary to Bruggen et al. (2009) but supports Orens et al. (2009), who discover that information asymmetry affect ICD. For this research, information asymmetry is significant to external capital as it is measured from share ownership outside the top 10 major shareholders, with most information being disclosed in the 2 nd interval.
The results go against the findings of Marisanti & Kiswara (2012) who find that firms with higher profitability tend to reduce IC disclosure. However, there is a possibility that firms with higher profitability would disclose more information compared to firms with lower profitability (Khlif & Souissi, 2010). Thus, higher profitability means a higher probability for firms to disclose IC. The result shows that profitability significantly affects HC and InC that only H4a and H4b are accepted. Profitability influences how employees or managers act, as it is related to the bonus they might receive.
Leverage does not significantly affect ICD as a whole. The result is in line with Ferreira et al. (2012), Ousama et al. (2012) , and Muttakin et al. (2015) but is conflicting with Rashid et al. (2012), Oliveira et al. (2013), and Kamardin et al. (2017) who find that leverage has insignificant effect of ICD. The insignificant effect of leverage on ICD may be caused by the lack of demand from creditors to disclose firm's non-financial information, especially regarding ICD; since for debitors, firm's capability to service its debts is the most important. According to Cheng (2014), the balance sheet is an important tool for creditors to evaluate the financial risk attached to a firm. This study assumes that debtors tend to pay attention only to disclosures with numerical and currency data.
As the objects of study mostly disclose IC on 49% level in the 1 st interval and 23% in interval 0, this means there is basically no IC disclosure.

Conclusion
The main purpose of this study is to explore the quality of ICD in the current modern economy. The study chose Thailand, the largest agricultural country in ASEAN and specifically the sectors of agriculture and resources. The findings show that firm size is the variable that consistently affects all aspects of ICD. Higher market share leads to lower HCD and InCD, while information asymmetry increases the quality of ECD. ROA as a measurement of firm profit positively affects the quality of HCD and InCD. Leverage is the only independent variable that consistently does not affect any of ICD's components. Other than leverage, all variables used in the study then significantly affect the creation of ICD value. The research aims to encourage firms' awareness of specific, numerical data-supported ICD.
In this modern era access to an entity's information becomes incredibly easy and could become a threat if a firm does not maximize its presentation of information. The disclosure of IC has become a practice that determines a firm's maturity and the vision of the firm's management (Joshi et al., 2018). These findings underline the importance of ICD as a form of the firm's responsibility to both internal and external parties. Based on Table III, the result of regression panel shows that the ability of firm size, market share, information asymmetry, profitability (ROA), and leverage in affecting each component of ICD are 12.14% for HC, 39.85% for InC, and 21.88% for EC. The three models show the capability of each independent variable in affecting the dependent variable is relatively low. Edvinsson (2013) asserts the role of IC on individuals, organizations, society, and globally to maximize results. Firms must note and maximize their IC in order to support the firm's objectives. Firms are expected to be able to present a specific disclosure of human capital, internal capital, and external capital in annual reporting.