Abstract
The study examined the effects of conventional treatment of Human Asset on Net Profit; determined the effects of Human Resources Capitalization on firm’s net worth; determined the effect of Human Resources Capitalization on firms' share prices. The study adopted the survey research design and well-structured questionnaire was purposively distributed to 100 staffs of selected firms in the Central senatorial district of Ondo state. Data collected were presented and analysed using ANOVA and Regression. The study revealed that creating room for creative accounting, lack of accounting standard backing conventional treatment of human resources and Biasness in financial reporting are joint indicator of the effect of conventional treatment of Human Asset on Net Profit (R2= 0.577; P < 0.005). The study clearly shows that improving investors’ confidence (29.236; 145.171; 0.000), ease in assessing future potential earnings (29.042; 66.933; 0.000); Contribution to decision making process of capital formation (26.197; 100.249; 0.000); sustainable equity position (23.988; 137.766; 0.000); have significant effect on firm’s network. The study also shows that increase in the level of profitability (4.026; 6.789; 0.000), firm’s growth (23.430; 74.008; 0.000); increase in the size of a firm (11.087; 95.832; 0.000); have significantly affected the share price of a firm. It was concluded that increase in profitability, firm size and growth are some of the cogent effect of capitalization of human resources have an effect on the share price of a firm. The study recommends that professionals, regulators and preparers of financial statements should be enlightened in order to improve the reporting of human resources cost on the face of the financial statement.
Highlights
The past decades have witnessed a global transition from manufacturing to service based economies (Okpala & Chidi, 2010)
Based on the empirical findings of the study, it could be concluded that as a result of creating room for creative accounting, lack of accounting standard backing conventional treatment of human resources and Biasness in financial reporting, capitalization of human resources will lead to investors and potential investors making unsound decisions in regards to the profitability of a firm
The capitalization of human assets would enhance the networth of a firm as investors and potential investors would be able to determine the productive capabilities of the firm through its workforce
Summary
The past decades have witnessed a global transition from manufacturing to service based economies (Okpala & Chidi, 2010). The fundamental difference between the two sectors lies in the very nature of their assets. The former sector is driven by physical assets like plants, machinery, material etc. While the latter is driven by knowledge, skills and attitude of the employee (Mayo, 2006). For instance in the case of an IT firm, the value of its physical assets in negligible when compared with the value of the knowledge and skills of its personnel. Academic institutions, consulting firms the total worth of the organization depends mainly on the skills of its employees and the services they renders. The present century is knowledge driven; as Nigeria intensify effort to actualize vision www.cribfb.com/journal/index.php/ijscgr International Journal of Shari'ah and Corporate Governance Research
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