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Human capital resource as cost or investment: a market-based analysis

Human capital resource as cost or investment: a market-based analysis
Human capital resource as cost or investment: a market-based analysis
This study empirically investigates the myopic behavior of the stock market toward firms’ human capital resource investment, paying particular attention to two key proxies: human resource expenditure and the firm value added allocated to the employees. Focusing on human capital resource investment decisions’ alignment with near versus longer-term emphasis by investors, we examine firms listed in the Financial Times Stock Exchange (FTSE) 100 over a five-year period using an established accounting-based valuation model. Our results show that human capital investment discourse leads to overweighting of the forecasted longer-term earnings in the apportionment of share price constituents, suggesting that investors consider investment in employees to generate more return in the longer-term. Additionally, our findings prove that investors respond to firm level human capital resource as an investment generating more return in the longer-term. This emphasises the importance of communicating human capital resource investment information that accurately reflects the firm value creation via employees in external financial reporting.
FTSE 100, human capital resource, human resource expenditure, market myopia, value added
0958-5192
Vithana, Krishanthi
f6916e65-2c61-43ab-8ce3-897a2f8b6591
Jayasekera, R
1e03402f-3787-43d2-8154-21a5b5a1ab2c
Choudhry, Taufiq
6fc3ceb8-8103-4017-b3b5-2d38efa57728
Baruch, Yehuda
25b89777-def4-4958-afdc-0ceab43efe8a
Vithana, Krishanthi
f6916e65-2c61-43ab-8ce3-897a2f8b6591
Jayasekera, R
1e03402f-3787-43d2-8154-21a5b5a1ab2c
Choudhry, Taufiq
6fc3ceb8-8103-4017-b3b5-2d38efa57728
Baruch, Yehuda
25b89777-def4-4958-afdc-0ceab43efe8a

Vithana, Krishanthi, Jayasekera, R, Choudhry, Taufiq and Baruch, Yehuda (2021) Human capital resource as cost or investment: a market-based analysis. The International Journal of Human Resource Management. (doi:10.1080/09585192.2021.1986106).

Record type: Article

Abstract

This study empirically investigates the myopic behavior of the stock market toward firms’ human capital resource investment, paying particular attention to two key proxies: human resource expenditure and the firm value added allocated to the employees. Focusing on human capital resource investment decisions’ alignment with near versus longer-term emphasis by investors, we examine firms listed in the Financial Times Stock Exchange (FTSE) 100 over a five-year period using an established accounting-based valuation model. Our results show that human capital investment discourse leads to overweighting of the forecasted longer-term earnings in the apportionment of share price constituents, suggesting that investors consider investment in employees to generate more return in the longer-term. Additionally, our findings prove that investors respond to firm level human capital resource as an investment generating more return in the longer-term. This emphasises the importance of communicating human capital resource investment information that accurately reflects the firm value creation via employees in external financial reporting.

Text
Vithana et al Human Capital Resource IJHRM 2021 - Accepted Manuscript
Restricted to Repository staff only until 13 April 2023.
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More information

Accepted/In Press date: 14 September 2021
e-pub ahead of print date: 13 October 2021
Keywords: FTSE 100, human capital resource, human resource expenditure, market myopia, value added

Identifiers

Local EPrints ID: 452465
URI: http://eprints.soton.ac.uk/id/eprint/452465
ISSN: 0958-5192
PURE UUID: ef4f978e-6a73-4da7-93b3-f2804dd7d618
ORCID for Krishanthi Vithana: ORCID iD orcid.org/0000-0001-9976-7399
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: 11 Dec 2021 11:03
Last modified: 28 Apr 2022 02:12

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Contributors

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

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