This study examines the pricing of knowledgebased firms compared with firms that are less dependent on human resources. The results show that an increasing dependence on human resources is followed by a rise in abnormal return. The results indicate that investors are not able to distinguish personnel investments from expenses, leading to an underestimation of earnings and return. The findings suggest that investors may need accounting information on human resources to help improve investment decisions. There is no evidence in the present material to suggest that investors perceive knowledgebased firms as more risky compared with firms with more accountable tangible assets.
Journal of Human Resource Costing & Accounting – Emerald Publishing
Published: Feb 1, 1997