Intellectual Capital Disclosure in Malaysia Juyati Mohd Amin, Siti Masnah Saringat, Hazlina Hassan & Wan Adibah Wan Ismail Universiti Teknologi MARA 85009, Segamat, Johor, MALAYSIA Abstract- This study investigates intellectual capital (IC) disclosure in Malaysian public listed companies. Specifically, this research examines the relationship between IC disclosure and companies’ profitability, productivity, and firm size. We measure the IC disclosure using the IC disclosure index and I C disclosure frequency. The sample includes 255 firm-year observations from 2006-2008. The results from our content analysis confirm those of prior research that the IC disclosure has been increasing over time. The study finds that human capital is the most reported intellectual capital disclosure. In addition, we also find that firm size positively contribute to the disclosure of IC. The result of this study added to the body of literature by providing evidence on the relationship between IC disclosure and firms’ characteristics. I. INTRODUCTION In this era of information and technology, the global economy is changing into a knowledge-based economy where productivity and growth have become more dependent on knowledge. It is gradually accepted that knowledge assets has increasingly becomes an important means for value creation. The capacity of business corporations to earn can no longer be attributed mainly to its tangible assets but more to its intangible knowledge assets or intellectual capital (IC). IC represents a company’s ‘softer’ assets such as human resources, know-how, intellectual property rights, manufacturing procedures, organizational structure, problem- solving capacity and internal and external relationships [17] . Prior researchers have argued that, in the knowledge economy, IC has become one of the primary sources of competitive advantage for a firm (for e.g.: [7]; [14] and [14]). Since knowledge is a source of competitive advantages, firms must develop their ability to identify and manage it. Given the remarkable shift in the underlying production factors of a business within the new knowledge economy [13], it is important for firms to be aware of the importance of IC that would lead to value creation for the firm [25]. In recent years, there is a growing agreement that traditional financial reporting is inadequate in satisfying the information needs of stakeholders, particularly in a knowledge economy characterised by a rapidly emerging emphasis on IC. IC information is one of the information needs of the stakeholders. The information is vital for the stakeholders to more fully understand the company and allows them to assess better the company’s future wealth creation capabilities. If IC is the key to future success, but is not adequately reflected in traditional accounting financial measures, and if financial measures are the main drives of top management’s decision making, what measuring system would fulfill the requirements of the new economy and the needs of modern companies? Given the increased importance of IC and to address the above questions, this study is carried out in order to determine whether IC disclosure affect company’s performance in terms of profitability, productivity and company size, thus, be one of the sources of competitive advantage. While there have been many studies focusing on IC disclosures by companies in developed countries, few such studies have examined these practices among Malaysian companies. The aim of this study is to contribute towards the empirical evidence of IC disclosures among Malaysian companies. This study a l s o offers a d d i t i o n a l insights into the relationship between the extent of IC disclosures with company size and company performance. Prior studies have found that the company size, the company’s industry, and ownership structure are drivers of IC reporting. However, not much empirical evidence has been found in Malaysia. Thus, this study can fill this gap. Specifically, this study aims to measure the extent of disclosure of information on intellectual capital in Malaysian companies. In addition, this study examine the relationship between the level of IC disclosures measured by intellectual capital disclosure index and intellectual disclosure frequency, and the companies’ profitability, productivity, and firm size. The study uses content analysis to analyze the extent of disclosure of IC information in the annual reports of companies listed on the Main Board of Bursa Malaysia over the year of 2006-2008. 978-1-4673-5968-9/13/$31.00 ©2013 IEEE 2013 IEEE Business Engineering and Industrial Applications Colloquium (BEIAC) 703