The Impact of Human Resource Accounting on Profitability: A Study of Listed Textile Firms on PSX

Abstract

Organizations spend a considerable amount of money on their employees; however, the accounting treatment and disclosures of this amount still needs to be standardized. This study aims to assess how the number of employees and staff cost affects the financial outcomes of textile enterprises listed on the Pakistan Stock Exchange. The purpose is to assist organizations in understanding the impact and worth of their human capital investment in accomplishing long-term goals. The study utilized an ex post facto analysis methodology and obtained data from the financial statements of 73 organizations over a five-year period from 2017 to 2021. Panel regression analysis was performed using E-views software. The Breusch-Pagan test is employed to measure the heteroscedasticity of regression errors, and then the Hausman test is utilized to determine the best approach between a fixed effect and a random effect. The findings revealed that staff cost positively affects financial performance, whereas the number of employees significantly negatively affects financial performance. Therefore, the study recommends investing in employees to boost the firm’s profitability. Also, accounting standards and disclosures should be incorporated into human resource accounting.