[Paper Review] A Study on the Impact of Human Resource Accounting on Firms Value with Respect to Companies Listed in National Stock Exchange

Shinde Ashlesh Anil, R Sudharani+1 more|arXiv (Cornell University)|Jul 2, 2022

Financial Reporting and Valuation Research4 citations

TL;DR

This study examines the impact of employment benefit costs—treated as human resource accounting—on firm value using panel data from 20 NSE-listed companies over 10 years. Using fixed-effects regression in E-Views, it finds a significant positive relationship between employment benefit costs and profitability metrics including profit after tax, ROE, ROA, total assets, and debt-equity ratio.

ABSTRACT

The study focuses on the Impact of Employment Benefit Cots on the Profitability of Companies listed in the National Stock Exchange. The study has considered the Amount spent on Employment Benefit Cots as an Independent variable and Profit after tax, Total Assets, Return on Equity, and Return on Asset and Debt equity Ration as the Dependent variable. The present study is to analyses the relationship between Employment Benefit Cots and Profit after tax, Total Assets, Return on Equity, Return on Asset, and Debt equity Ration. The data is collected from 20 companies listed on the National Stock Exchange for 10 years from the Annual reports of companies. The data collected were analyzed using Panel data Regression in E-Views. Results revealed that there is a significant Relationship between Employment Benefit Cots and Profit after tax, Total Assets, Return on Equity, Return on Asset, and Debt equity Ration. The study shows that Employment Benefit Cots impact positively on Firms profitability.

Motivation & Objective

• To analyze the relationship between employment benefit costs and firm profitability in Indian listed companies.
• To assess the influence of human resource accounting on key financial performance indicators such as ROE, ROA, and debt-equity ratio.
• To evaluate whether investment in employee benefits contributes to firm value creation in the context of Indian capital markets.
• To provide empirical evidence on the financial significance of human resource accounting in listed firms on the National Stock Exchange.

Proposed method

• Data was collected from annual reports of 20 companies listed on the National Stock Exchange (NSE) over a 10-year period (2008–2017).
• The study uses panel data regression analysis to model the relationship between employment benefit costs (independent variable) and financial performance indicators (dependent variables).
• Fixed-effects regression models were estimated using E-Views software to control for unobserved heterogeneity across firms.
• Dependent variables include profit after tax, total assets, return on equity (ROE), return on assets (ROA), and debt-equity ratio.
• The model accounts for time-invariant firm-specific effects and allows for within-firm variation over time.
• Statistical significance of coefficients was tested to determine the strength and direction of the relationships.

Experimental results

Research questions

• RQ1 What is the impact of employment benefit costs on the profitability of NSE-listed firms?
• RQ2 How do employment benefit costs influence return on equity (ROE) and return on assets (ROA) in Indian firms?
• RQ3 Is there a significant relationship between employment benefit costs and total assets of listed companies?
• RQ4 To what extent do employment benefit costs affect the debt-equity ratio of firms in the sample?
• RQ5 Does human resource accounting, as reflected in employment benefit costs, contribute to firm value creation in Indian capital markets?

Key findings

• Employment benefit costs have a statistically significant positive impact on profit after tax, indicating that higher HR spending correlates with higher net income.
• A significant positive relationship was found between employment benefit costs and return on equity (ROE), suggesting improved shareholder returns with greater HR investment.
• The study confirms a significant positive association between employment benefit costs and return on assets (ROA), implying improved asset efficiency.
• Employment benefit costs are significantly linked to total assets, indicating that firms with higher HR spending tend to have larger balance sheet sizes.
• A significant positive relationship was observed between employment benefit costs and the debt-equity ratio, suggesting that HR investment may be associated with higher financial leverage.
• Overall, the results support the view that human resource accounting, as measured by employment benefit costs, contributes positively to firm value and financial performance in Indian listed firms.