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An analysis of the effect of temporary/permanent contracts on firm efficiency performance: evidence from South Korea

Lim, Hyoung Joo; Mali, Dafydd

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Authors

Hyoung Joo Lim

DAFYDD MALI Dafydd.Mali1@nottingham.ac.uk
Assistant Professor in Accounting



Abstract

Purpose: Because no international accounting policy exists to mandate human capital (HC) information must be reported on financial reports, the association between workforce HC and firm performance/efficiency is not well-established. South Korea is a rare example with high HC reporting quality, as well as relatively high national productivity. On the other hand, in some developed countries (such as the UK), HC reporting quality and productivity is low. Moreover, there is an increasing propensity to offer employees non-standard contracts. Thus, because of a divergence in HC reporting quality internationally, the South Korean sample can provide valuable insights to countries with weak HC reporting quality about the association between contract quality and firm performance/efficiency. Design/methodology/approach: Using a sample of Korean listed firms (2010–2015), pooled Ordinary Least Squares (OLS) regression analysis is conducted to show whether firms that offer employees higher levels of permanent, relative to temporary contacts, demonstrate higher firm performance/efficiency. Findings: Firms that provide employees with increasing permanent (temporary) contracts experience higher (lower) performance/efficiency. Research limitations/implications: This research is limited due to sample selection. However, the sample represents the population of all firms that report contract type information in South Korea, a market with highly robust HC information reporting. Originality/value: Because of data unavailability, a positive association firm-level performance/efficiency and permanent employment can only be made in a handful of countries. The study has policy implications and extends the non-financial reporting literature by addressing HC reporting limitations that exist in the mainstream accounting framework. Based on relative operational efficiency/performance, the study offers practical insights to management about the importance of staff retainment. Moreover, the authors also offer an anthropocentric perspective by inferring how low HC reporting quality can have a negative impact on society in Industry 4.0.

Citation

Lim, H. J., & Mali, D. (2023). An analysis of the effect of temporary/permanent contracts on firm efficiency performance: evidence from South Korea. Journal of Applied Accounting Research, 24(1), 149-169. https://doi.org/10.1108/JAAR-08-2021-0227

Journal Article Type Article
Acceptance Date May 1, 2022
Online Publication Date Jun 3, 2022
Publication Date Jan 13, 2023
Deposit Date Jun 22, 2022
Publicly Available Date Jun 24, 2022
Journal Journal of Applied Accounting Research
Print ISSN 0967-5426
Publisher Emerald
Peer Reviewed Peer Reviewed
Volume 24
Issue 1
Pages 149-169
DOI https://doi.org/10.1108/JAAR-08-2021-0227
Keywords annual reports; human capital; legitimacy theory; productivity; accounting policy; employee rights
Public URL https://nottingham-repository.worktribe.com/output/8631672
Publisher URL https://www.emerald.com/insight/content/doi/10.1108/JAAR-08-2021-0227/full/html

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