An explanation of human capital disclosure from the resource‐based perspective

Abstract

Though the importance of human capital (HC) in firm value creation is firmly established in the literature the level of emphasis placed on human capital disclosure (HCD) by preparers of financial statements and sell-side analysts is minimal. The purpose of this paper is to address this dilemma by critically analysing the conceptualisation of human capital in disclosure literature and introduce a more germane explanation. Keywords AbstractPurpose -Though the importance of human capital (HC) in firm value creation is firmly established in the literature the level of emphasis placed on human capital disclosure (HCD) by preparers of financial statements and sell-side analysts is minimal. The purpose of this paper is to address this dilemma by critically analysing the conceptualisation of human capital in disclosure literature and introduce a more germane explanation.Design/Methodology/approach -The paper begins by reviewing the literature on intellectual capital disclosure (ICD) to examine the level of HC disclosure in various company media and use of such information by the capital market. It then critically analyse the conceptualisation of HC in those studies with a view to form an opinion about the adequacy of that conceptualisation. Then resource based view is justified as providing a more appropriate conceptualisation of HC to meet demands of the capital market.Findings -Substantial ICD literature conceptualise HC using human capital theory as a collection of knowledge and competences possessed by employees individually and collectively in firms. This has resulted in HC disclosure scores being considerably low compared to external and internal capital disclosure and does not portray HC in a way that is useful to the capital market. Resource based perspective enable HC to be depicted in a way that closely resembles the value creation potential of firms' employees.Practical implications -Guidance is provided for future HCD and ICD studies to operationalise HC to reflect its value creation potential by encompassing not only the firm specific stock of knowledge and capabilities of employees but also the strategic human resource management practices, enabling corporate culture and the idiosyncratic systems and practices of the firm in place to reap the benefits of these.

Entrepreneurship Orientation and Innovation Capability: The Role of Intellectual Resources as Mediation (A Case Study of SMEs Furniture in Madiun East Java)

“…Intellectual resources are the expertise, knowledge and talent and experience possessed by the individuals of SMEs furniture under study. The results of this study support the findings of Sharabati et al (2010) and Abhayawansa and Abeysekera (2008). Companies with an entrepreneurship orientation can enhance the company's capability and help companies to find new opportunities and then take action in the form of innovation that can benefit the company.…”

“…According to the findings of Abhayawansa and Abeysekera (2008), the intellectual resources of human capital in the company can have a positive impact because human capital is the driving force of the economy, competition and prosperity. The ability of people to apply knowledge and skills is an important element that can improve the ability of behavior and selfdevelopment.…”

Human Resource Disclosures in Corporate Annual Reports of Insurance Companies: A Case of Developing Country

“…Business practitioners, organizational theorists and researchers are interested in human resource and human capital disclosures since last 1980s [15]. For intangible assets-based companies, intellectual capital became a popular term during the 1990s.…”

Human Resource Disclosures in UK Corporate Annual Reports: To What Extent Do These Reflect Organisational Priorities Towards Labour?

“…The research agenda on IC disclosure has generated a notable body of work on the extent of disclosures or narratives incorporating various aspects of "human capital" (HC) in a number of contexts, mainly on the grounds that such information is market-sensitive (Abhayawansa and Abeysekera 2008;Cuganesan 2006;Lin et al 2012;Samagaio and Rodrigues 2016). Nevertheless, the extent of IC disclosure has been found to be generally low or fluctuating considerably; with some attention paid to HC reporting more recently (McCracken et al 2018) that is suggestive of stakeholder-led motivations rather than marketled ones.…”

“…Secondly, and as highlighted previously, a few studies (e.g. Guthrie 2004, 2005;Abeysekera 2008;Bowrin 2018) have examined some facets of HRDs, but these are often subsumed within broader (and arguably more shareholder wealth-centric) concepts, such as IC reporting (Abeysekera and Guthrie 2004;Abhayawansa and Abeysekera 2008). Furthermore, social and/or environmental studies have begun to focus on the "comprehensiveness" or "substantiveness" of the information (e.g.…”