Outside board directors’ expertise and intellectual capital disclosure: evidence from FTSE 350 companies

Recent amendments to statutory reporting regime require the approval of strategic report (SR) by board of directors. As the guidance on SR encourages narrative content of firms’ value creation processes, regulators were concerned about the impact of board of directors on corporate transparency. Using content analysis approach upon a sample of nonfinancial UK firms listed in the FTSE 350, this study aims to examine whether expertise diversity of outside directors (ENEDs) on the board promotes intellectual capital (IC) disclosure. Drawing on the dual functions of boards of directors (monitoring and advising), we find that cross-directorship, nonaccounting and academic background are positively associated with level of IC disclosure, in line with agency and resource dependence perspectives. However, this is not the case for firms with more accounting ENEDs on the board. In addition, prior empirical studies have largely focused on IC disclosure in a static sense, while we find that it is the nonaccounting and academic ENEDs that matter to IC disclosure narratives connecting with corporate strategies. Results are robust to the use of alternative variables in board expertise. Our evidence suggests the needs of policymakers to better understand the role of boards of directors in the increasingly rich and complex information environment of corporate voluntary-based reporting. By adopting multiple attributes of IC disclosure narratives, this paper is distinct from what the extant disclosure literature has examined on the association with IC.