Intellectual capital in developing economies: Do all dimensions matter for risk disclosure compliance with IFRS 7 requirements by Financial Institutions in Uganda?

Abstract

This paper examined the impact of Intellectual Capital (IC) and its components, namely, human capital, structural capital and relational capital, on the level of Risk Disclosure Compliance (RDC) with International Financial Reporting Standard (IFRS) 7 requirements (RDC_IFRS7) among financial institutions (FIs) in Uganda.The study adopted a cross-sectional design where data were collected through a questionnaire survey and audited financial statements of 83 FIs. The authors employed partial least square structural equation modeling (SmartPLS32.7) to test hypotheses. The results indicated that the mean RDC_IFRS7 level was low. The results further found that IC was a significant predictor of RDC_IFRS7. Additionally, human capital and structural capital were significant predictors of RDC_IFRS7. Nevertheless, relational capital was insignificantly related with RDC_IFRS7. The study provided relevant insights for regulators and policy makers of FIs. The study also suggested that FIs should always maintain efficient IC mix that can add value to RDC_IFRS7. Furthermore, the results suggested that FIs should build resilient human resource base and invest in a solid technology-knowledge infrastructure to enhance RDC_IFRS7 levels. Besides, the study added theoretical foundations of IC to the RDC knowledge.

Keywords: Intellectual capital, Risk disclosure compliance, IFRS 7, financial institutions