Exploring the effects of voluntary disclosures on hidden value: an analysis of Australian and Thai listed companies

Intangible assets generate most of corporate growth and shareholder value while stakeholders’ concerns about social and environmental issues have increased significantly around the globe. Current accounting standards are unable to capture the financial or other consequences of these two issues, resulting in a difference between book value and market value of a listed entity. The difference has been termed ‘hidden value’. Lev and Rubenstein suggested that management should disclose supplementary information to their stakeholders to increase their knowledge of the intangible assets as well as the consequences of social and environmental activities undertaken by the firm to explain the difference between market and book values. The purpose of this thesis was to investigate whether voluntary disclosures in relation to intellectual capital and the community and environment made by 41 listed companies (20 Australian and 21 Thai companies) increased the knowledge of stakeholders and so impacted on hidden value. The findings of this study showed that listed Australian firms disclosed more voluntary sentences than Thai firms. These voluntary disclosures particularly those concerning intellectual capital before the global financial crisis statistically (positively) affected hidden value. This finding demonstrates that voluntary information may minimise the imperfections of accounting practices. The voluntary disclosures were descriptive, largely selective and self-laudatory.