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HR as cost or investment: the distinction between near- Vs. Longer-term focus of firm valuation

HR as cost or investment: the distinction between near- Vs. Longer-term focus of firm valuation
HR as cost or investment: the distinction between near- Vs. Longer-term focus of firm valuation

This study empirically investigates the myopic approach stock market takes towards human capital investment decisions. Focusing on human capital investment decisions' alignment with short- versus long-term financial motivations of the firm, we examine firms listed in the Financial Times Stock Exchange (FTSE) 100 over a five-year period using an established accounting- based valuation model. The results show that investors of firms that allocate a greater (smaller) portion of value added to their employees will overweight (underweight) forecasted long-term earnings and underweight (overweight) forecasted short-term earnings. The findings challenge the mainstream argument of using human resource expenditure as the primary proxy for firms' human capital investment; rather taking it as an investment that manifests itself in generating future returns.

British Academy of Management
Vithana, Krishanthi
f6916e65-2c61-43ab-8ce3-897a2f8b6591
Jayasekera, Ranadeva
341476a7-e831-4acb-97bc-df681bd4fe73
Choudhry, Taufiq
6fc3ceb8-8103-4017-b3b5-2d38efa57728
Baruch, Yehuda
25b89777-def4-4958-afdc-0ceab43efe8a
Vithana, Krishanthi
f6916e65-2c61-43ab-8ce3-897a2f8b6591
Jayasekera, Ranadeva
341476a7-e831-4acb-97bc-df681bd4fe73
Choudhry, Taufiq
6fc3ceb8-8103-4017-b3b5-2d38efa57728
Baruch, Yehuda
25b89777-def4-4958-afdc-0ceab43efe8a

Vithana, Krishanthi, Jayasekera, Ranadeva, Choudhry, Taufiq and Baruch, Yehuda (2018) HR as cost or investment: the distinction between near- Vs. Longer-term focus of firm valuation. In 78th Annual Meeting of the Academy of Management, AOM 2018. British Academy of Management.. (doi:10.5465/AMBPP.2018.9).

Record type: Conference or Workshop Item (Paper)

Abstract

This study empirically investigates the myopic approach stock market takes towards human capital investment decisions. Focusing on human capital investment decisions' alignment with short- versus long-term financial motivations of the firm, we examine firms listed in the Financial Times Stock Exchange (FTSE) 100 over a five-year period using an established accounting- based valuation model. The results show that investors of firms that allocate a greater (smaller) portion of value added to their employees will overweight (underweight) forecasted long-term earnings and underweight (overweight) forecasted short-term earnings. The findings challenge the mainstream argument of using human resource expenditure as the primary proxy for firms' human capital investment; rather taking it as an investment that manifests itself in generating future returns.

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More information

e-pub ahead of print date: 9 July 2018
Venue - Dates: 78th Annual Meeting of the Academy of Management, AOM 2018, Chicago, United States, 2018-08-10 - 2018-08-14

Identifiers

Local EPrints ID: 425523
URI: https://eprints.soton.ac.uk/id/eprint/425523
PURE UUID: f7868320-a2a3-4ff4-a6ba-526bbe7425e5
ORCID for Taufiq Choudhry: ORCID iD orcid.org/0000-0002-0463-0662
ORCID for Yehuda Baruch: ORCID iD orcid.org/0000-0002-0678-6273

Catalogue record

Date deposited: 23 Oct 2018 16:30
Last modified: 10 Dec 2019 01:49

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Contributors

Author: Ranadeva Jayasekera
Author: Taufiq Choudhry ORCID iD
Author: Yehuda Baruch ORCID iD

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