Labor cost voluntary disclosures and firm equity values: Is human capital information value-relevant?

This study examines the market value relevance of labor cost voluntary disclosures using a valuation model relating firm market values to book values of equity and to disclosed human capital information, such as labor costs, net pension liabilities (NPLs), and estimated average and marginal labor productivity and efficiency indicators. Results indicate that labor cost disclosing companies command higher equity market values in general, and that labor productivity and efficiency measures appear to be undervalued. Both findings suggest that there might be market opportunities for firms with valuable human capital to differentiate themselves from their industry peers, which might encourage further human capital disclosure in the future. More refined measures of human capital assets and investments are needed to assess firms' human resource management decisions and performance impacts in the capital markets more adequately.