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

Krishanthi Vithana; Ranadeva Jayasekera; Taufiq Choudhry; Yehuda Baruch

doi:10.5465/AMBPP.2018.9

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

Krishanthi Vithana, Ranadeva Jayasekera, Taufiq Choudhry, Yehuda Baruch

Research output: Contribution to journal › Conference article › peer-review

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.

Original language	English
Journal	Academy of Management Annual Meeting Proceedings
DOIs	https://doi.org/10.5465/AMBPP.2018.9
State	Published - 2018
Externally published	Yes
Event	78th Annual Meeting of the Academy of Management, AOM 2018 - Chicago, United States Duration: 10 Aug 2018 → 14 Aug 2018

Bibliographical note

Publisher Copyright:
© 2018 Academy of Management. All rights reserved.

ASJC Scopus subject areas

Management Information Systems
Management of Technology and Innovation
Industrial relations

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

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10.5465/AMBPP.2018.9

Cite this

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title = "HR as cost or investment: The distinction between near- Vs. Longer-term focus of firm valuation",

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.",

author = "Krishanthi Vithana and Ranadeva Jayasekera and Taufiq Choudhry and Yehuda Baruch",

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journal = "Academy of Management Annual Meeting Proceedings",

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T2 - 78th Annual Meeting of the Academy of Management, AOM 2018

AU - Vithana, Krishanthi

AU - Jayasekera, Ranadeva

AU - Choudhry, Taufiq

AU - Baruch, Yehuda

PY - 2018

Y1 - 2018

N2 - 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.

AB - 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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DO - 10.5465/AMBPP.2018.9

M3 - Conference article

AN - SCOPUS:85208214996

SN - 0065-0668

JO - Academy of Management Annual Meeting Proceedings

JF - Academy of Management Annual Meeting Proceedings

Y2 - 10 August 2018 through 14 August 2018

ER -

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

Abstract

Bibliographical note

ASJC Scopus subject areas

UN SDGs

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