Intellectual Capital Disclosure, Information Asymmetry, Cost of Capital, and Firm Value: Empirical Studies on Indonesian Manufacturers

Signaling theory suggests that when high
-
quality entities signal their potentials such as intellectual
capital to the market, its participants (e.g., investors) re
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evaluate their worth and make informed decisions
therefrom. This paper examines
the consequences of intellectual capital disclosures with respect to firm value,
information asymmetry, and cost of capital. Voluntary intellectual capital disclosure (ICD, measured in
index) affects firm value (FV, measured in Tobin‟s Q) through reducing
both information asymmetry (IA,
measured in bid
-
ask spread) and cost of capital (COC, measured in weighted average cost of capital). 67
Indonesian manufacturers were purposively selected whose financial reports published in Indonesian Stock
Exchange offici
al website and Bloomberg provide the data for the research. A research model is estimated to
the data through a partial least square analysis. Results provides substantial evidence on the positive effect of
ICD on FV and negative effect on IA; negative eff
ect of IA on FV; negative effect of COC on FV; and
positive effect of IA on COC. On a separate analysis, IA is shown to significantly mediate the relationship
between ICD and FV