Use of IC information in Japanese financial firms

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Abstract:

Purpose ‐ The purpose of this paper is to explore the perceptions of: how Japanese financial firms (JFF) acquire and use company intellectual capital (IC) information in their common routine equity investment decisions, how this activity contributes to knowledge creation in the JFFs, and how investee company knowledge creation is affected by the JFFs. Design/methodology/approach ‐ The research employed a multi-case design, using four JFF cases. The investigation was performed in terms of Nonaka and Toyama's "theory of the knowledge creating firm". Findings ‐ IC information contributed to earnings estimates and company valuation. Emotional information contributed to JFF feelings and confidence in their information use and valuation. JFF knowledge was an important component of the key interacting and informed contexts used by JFFs. This generated opportunities to improve disclosure and accountability between JFFs and their investee companies. Common patterns of behaviour across the JFFs were counterbalanced by variety and differences noted in JFF behaviour. Practical implications ‐ The findings provide important insights into how JFF knowledge creating patterns could limit or progress a common language of communication between companies and markets on the subject of IC. This could impact on the quality of corporate disclosure and accountability processes. Originality/value ‐ The paper demonstrates that there is a need for further use of qualitative studies of financial market behavior. Especially in the area of understanding the communication of IC between firms and financial markets, the potential of using sociology of finance approaches appears to be considerable.

Keywords: Accountability; Disclosure; Financial markets; Intellectual capital; Japan; Knowledge

Document Type: Research Article

DOI: http://dx.doi.org/10.1108/14691931211276133

Publication date: October 19, 2012

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