ACCOUNTING AND FINANCIAL REPORTING RECOGNITION OF FIRMS’ HUMAN CAPITAL INVESTMENT: AN EMPIRICAL INVESTIGATION OF FIRMS IN THE FTSE 100 LISTING OF THE LONDON STOCK EXCHANGE

Firms’ spending on their employees is written off as expense to the annual financial statements under the current accounting treatment. This accounting treatment has been debated over decades, since employees are arguably claimed as the true value creators of firms’ intellectual capital. Value creation potential of employees, identified theoretically as human capital has been researched for valuation and measurement for accounting recognition of human capital investment and decision usefulness of financial reporting recognition through mandatory and mostly voluntary disclosure. Research evidence are found under different phenomenon namely; social capital, intellectual capital, human capital, etc. considering, investment, accounting and reporting practices, though on an ad-hoc basis, highlighting the need for a study covering a holistic picture of the accounting and financial reporting recognition of human capital investment. Hence, the research is conducted, addressing the current practice of accounting and financial reporting recognition of firms’ human capital investment, considering both determinants and consequences of the practice utilising a stakeholder approach. The research is undertaken with data collected from annual reports of firms of FTSE 100 listing of London Stock Exchange for five accounting years, (2004-2009) chosen subjected to data availability, analysed using panel data analysis techniques with fixed and random effect estimators coupled with pooled linear regression as an alternative approach. The results of the study indicated a significant variance in the practice implying positive influences on promoting the practice accounting and financial reporting recognition of human capital investment. The results further indicated the requirement of a framework governed by standards and guidelines in promoting the practice accounting and financial reporting recognition of firms’ human capital investment

Human resource disclosures in UK corporate annual reports: To what extent do these reflect organisational priorities towards labour?

Our study analyses the nature, quality and extent of human resource disclosures (HRDs) of UK Financial Times Stock Exchange (FTSE) 100 firms by relying on a novel disclosure index measuring the depth and breadth of disclosures. Contextually, we focus on the five-year period following the then Labour government’s attempts to encourage firms to formally report on their human resource management practices and to foster deeper employer-employee engagement. First, we evaluate the degree to which companies report comprehensively (or substantively) on a number of HRD items that we classify as “procedural” or “sustainable.” Second, we hypothesise that a company’s employee relation ideology (using a proxy to measure a company’s level of “unitarism”) is positively associated with HRD. Our results indicate that: (i) whilst there has been an increase in the breadth of HRD in terms of procedural and sustainable items being disclosed, the evolution towards a more comprehensive and in-depth form of HRD remains rather limited; and (ii) there is a positive association between a company’s employee relation ideology (unitarism) and the level of HRD. Theoretically, we conceive of HRD both as a reflection of an organisation’s orientation towards a key stakeholder (unitarist relations with labour) and a legitimacy seeking exercise at a time of changing societal conditions. We contribute to the scant literature on the extent and determinants of HRD since prior research tends to subsume employee-related disclosures within the broader concept of social, ethical or intellectual capital disclosures. We also propose a disclosure checklist to underpin future HRD research

Decent work and sustainable human capital management in responsible project management

Context: this chapter discuss responsible human capital management in project context focusing on promoting decent work with the aim of achieving inclusive economic growth and sustainable development. Characters/Entities: the chapter consider some examples from across the world on responsible human capital management in project context including the human capital related issues in Qatar world cup construction project. Locations: the overall discussion in the chapter takes an international perspective. However, some of the project human capital management related issues are being discussed taking regional and organizational contexts into account. As example the significance of human capital management issues related to one of the large-scale projects—construction of the Qatar world cup stadiums—and associated labour management and welfare issues in the country since the hosting status was granted has been discussed. Research gaps: extent literature covers little or no evidence positioning employees as a key stakeholder in project management context. In responsible project management context, it is imperative how to address this issue and explore further how responsible human capital management can benefit the project management in the longer term. We contribute to this gap in literature via the current chapter highlighting human capital management challenges in the project management context with recommendations on how to address and overcome these challenges. Challenges/Conflicts/Tensions: focus on decent work in project human capital management appears to be a solution to existing tensions and challenges project based and temporary organizations currently face specially in achieving inclusive economic growth and sustainable development.<br/

Human capital resources accounting and firm value creation: a governance and board decision-making perspective

Vithana, K. (2022). Human capital resources accounting and firm value creation: a governance and board decision-making perspective. In Research Handbook on Corporate Board Decision-Making (pp. 185-197). Edward Elgar Publishing

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.</p

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