Market performance impacts of human capital disclosures

This paper examines the market valuation and performance impacts of human capital-related information disclosures. Following a labor economics approach and using the annual reports of a sample of United States public companies, we construct human capital productivity and efficiency indicators and test for their informational content and value relevance following a portfolio performance approach. Results indicate that on average, firms with higher labor cost disclosures outperform their low labor cost counterparts. Estimated labor productivity and efficiency indicators also appear to be value-relevant since firms with higher value marginal products of labor, and higher marginal productivity relative to average labor costs, outperform their counterparts with lower values of both measures. We conclude that labor cost voluntary disclosures might be potentially useful in assessing human capital asset management and performance which could be relevant to market participants particularly for firms in knowledge-based industries.