Exploring the Effects of Corporate Governance on Intellectual Capital Disclosure: An Analysis of European Biotechnology Companies

This paper examines the relationship between governance variables and voluntary intellectual capital disclosure in a sample of European biotechnology firms. We extend previous research by simultaneously considering governance mechanisms such as the proportion of independent directors, board dimension, CEO duality and board structure in relationship to voluntary disclosure on intellectual capital. We understand voluntary disclosure as a multidimensional and complex concept and, hence, use the semantic properties of the information disclosed, and on the content of information, as proxies for the quality of disclosure. Our results suggest that governance-related variables strongly influence the quantity of information disclosed, thus confirming our hypotheses. In regard to the quality of disclosure, our results show that (1) the proportion of independent directors is positively related to the disclosure of internal structure, (2) CEO duality is negatively linked to the disclosure of forward-looking information, and (3) board structure helps to improve the annual report's overall readability. We contribute to agency theory by indicating that corporate governance mechanisms and voluntary disclosure can be used strategically to reduce agency conflicts. The results of this study might be of interest to regulators, investment analysts and market participants.