Skip to main content

Research Repository

Advanced Search

Do rating agencies impound workforce human capital information into default risk assessments?

Mali, Dafydd; Lim, Hyoung-joo

Authors

Dafydd Mali

Hyoung-joo Lim



Abstract

No accounting policy exists to mandate that employee-level human capital (ELHC) must be included on Annual Reports. Because structured ELHC information is rare, the association between ELHC and credit ratings (risk) is not demonstrated in the extant literature. South Korea is a unique instance where ELHC information is included on Annual Reports as a rule. Using a sample of 9,273 Korean listed firm-year observations from 2011-2020, we demonstrate that employee tenure, a ELHC proxy, has a positive association with credit ratings. The results infer that credit rating agencies interpret that employee tenure improves a firm's potential to survive a business cycle. The study also demonstrates that continuous employment has a more positive effect on credit ratings for NonBig4 and smaller clients/firms, compared to Big4 and larger clients/firms. The study contributes to the literature by demonstrating that firms that retain employees are less likely to default, implying that if firms look after employees, there are economic advantages. From a policymaking perspective, the study demonstrates the information advantage of reporting non-financial ELHC information on Annual Reports, on a structured/numerical basis.

Citation

Mali, D., & Lim, H. (2023). Do rating agencies impound workforce human capital information into default risk assessments?. Accounting Forum, 1-26. https://doi.org/10.1080/01559982.2023.2235873

Journal Article Type Article
Acceptance Date Jul 3, 2023
Online Publication Date Sep 4, 2023
Publication Date Sep 4, 2023
Deposit Date Dec 18, 2023
Publicly Available Date Mar 5, 2025
Journal Accounting Forum
Print ISSN 0155-9982
Electronic ISSN 1467-6303
Publisher Elsevier
Peer Reviewed Peer Reviewed
Pages 1-26
DOI https://doi.org/10.1080/01559982.2023.2235873
Keywords continuous employment tenure; credit ratings/risk; human capital; non- financial reporting 2
Public URL https://nottingham-repository.worktribe.com/output/28705289
Publisher URL https://www.tandfonline.com/doi/full/10.1080/01559982.2023.2235873
Additional Information Peer Review Statement: The publishing and review policy for this title is described in its Aims & Scope.; Aim & Scope: http://www.tandfonline.com/action/journalInformation?show=aimsScope&journalCode=racc20; Received: 2021-06-30; Accepted: 2023-07-03; Published: 2023-09-04

Files

This file is under embargo until Mar 5, 2025 due to copyright restrictions.




Downloadable Citations