Human capital disclosure and organizational performance

Abstract

Purpose This study aims to demonstrate the positive effect of human capital disclosure on firm performance, and to specify the boundary conditions of the relationship. Design/methodology/approach The study applies the signaling and stakeholder perspectives and uses a one‐year lag design to avoid reverse causality in exploring the human capital disclosure and performance link. Content analysis of annual reports and hierarchical regression are applied. Findings Human capital disclosure positively impacts on organizational performance such as market‐to‐book ratio and ROA. Organizational size negatively moderates the relationship between disclosure of human capital information and firm performance. Knowledge intensity has curvilinear positive moderation effect between the relationship above. Practical implications Human capital disclosure can help communicate to various stakeholders. Organizational performance can thus be enhanced through the communication process. Disclosure in the context of higher knowledge intensity is more beneficial. Originality/value The paper theoretically and empirically links up human capital disclosure and organizational performance. It also identifies both the diminishing return and increasing return moderation effects by organizational size and knowledge intensity between the human capital disclosure and performance link.