Value relevance of human capital information

Abstract

Purpose

The purpose of this paper is to investigate if human capital information voluntarily provided by German companies is value‐relevant.

Design/methodology/approach

By means of word‐based content analysis, human capital information is extracted from German companies’ annual reports. Subsequently, the value relevance of the disclosed human capital information is analyzed by applying two established valuation models.

Findings

The results show that human capital information is value‐relevant. Especially, information on qualification and competence issues is positively associated with firm value. Nonetheless, the disclosed information does not lead to short‐term changes in market value. Consequently, human capital information is value‐relevant but not immediately.

Practical implications

First, companies can improve their valuation on the capital market by disclosing information on their human capital. Second, standard setters can use this paper's results in defining relevant information categories for human capital disclosures. Third, the amount of human capital disclosures is increasing over time.

Originality/value

This study explicitly evaluates the value relevance of the overall (especially nonfinancial) human capital information voluntarily provided in corporate annual reports.

Citation

Gamerschlag, R. (2013), "Value relevance of human capital information", Journal of Intellectual Capital, Vol. 14 No. 2, pp. 325-345. https://doi.org/10.1108/14691931311323913