Investigating the Relationship Between Intellectual Capital Reporting and Firm Market Valuation Over Time

Posted: Aug 13, 2025

• Olivia Williams
• Olivia Wright
• Owen Baker

Abstract

This research presents a novel longitudinal investigation into the dynamic relationship between intellectual capital reporting practices and firm market valuation, employing an innovative methodological framework that combines computational linguistics with temporal network analysis. Traditional studies in intellectual capital reporting have predominantly focused on static correlations or cross-sectional analyses, failing to capture the evolving nature of how intangible assets influence market perceptions over time. Our study addresses this gap by developing a comprehensive intellectual capital reporting index derived from automated content analysis of corporate disclosures across multiple communication channels, including annual reports, investor presentations, and sustainability reports. We track 500 publicly traded technology and pharmaceutical firms over a 15-year period, analyzing how changes in intellectual capital reporting intensity, quality, and thematic focus correlate with market valuation metrics. The methodology introduces several innovations, including a multi-dimensional scoring system that captures not only the volume but also the strategic relevance and contextual integration of intellectual capital disclosures. Our findings reveal a complex, non-linear relationship characterized by threshold effects and industry-specific temporal patterns. Specifically, we identify critical reporting thresholds beyond which additional intellectual capital disclosures yield diminishing marginal returns on market valuation. Furthermore, we demonstrate that the timing and sequencing of intellectual capital reporting initiatives significantly impact their valuation effects, with early adopters of comprehensive reporting frameworks gaining sustained valuation premiums. The research contributes to both academic literature and practical applications by providing a dynamic framework for understanding how intellectual capital reporting evolves as a strategic communication tool and how markets gradually incorporate intangible asset information into valuation models over extended periods.