Skip to main content

HUMAN RESOURCE ACCOUNTING AND CORPORATE PROFITABILITY: A STUDY OF QUOTED MANUFACTURING ORGANIZATIONS IN NIGERIA






ATTENTION:
BEFORE YOU READ THE PROJECT WORK, PLEASE READ THE INFORMATION BELOW. THANK YOU!

TO GET THE FULL PROJECT FOR THE TOPIC BELOW PLEASE CALL:
08068231953, 08168759420

TO GET MORE PROJECT TOPICS IN YOUR DEPARTMENT, PLEASE VISIT:






HUMAN RESOURCE ACCOUNTING AND CORPORATE PROFITABILITY: A STUDY OF QUOTED MANUFACTURING ORGANIZATIONS IN NIGERIA




TABLE OF CONTENT
Title Page                                                                                 i
Certificate Page                                                                                ii
Approval Page                                                                          iii
Dedication                                                                               iv
Acknowledgement                                                                    v
Table of Contents                                                                     vi
List of Tables                                                                           vii
Abstract                                                                                   viii
CHAPTER ONE; INTRODUCTION
1.1   Background of the Study                                                         1
1.2   Statement of the Petroleum                                             6
1.3   Purpose of the Study                                                               9
1.4   Research Questions                                                         10
1.5   Research Hypothesis                                                               10
1.6   Significance of the Study                                                 11
1.7   Scope and Limitation of the Study                                   11
1.8   Conceptual Definition of Terms                                               12
1.9   Organization of the Study                                                        14
CHAPTER TWO: REVIEW OF RELATED LITERATURE
2.1   Introduction                                                                     17
2.2   Theoretical Framework                                                    17
2.3   Concept of Corporate Profitability                                    22
2.4   Employee Acquisition Costs and Profitability                   25
2.5   Employee Replacement Costs and Profitability                        28
2.6   Employee Separation Costs and profitability                   30
2.7   Human Resource Link to Profitability                              33
2.8   Human Resource and Corporate Profitability                   36
2.9   Behavioural Model                                                           39
2.10 Profit Margin                                                                    42
2.11 Gross Profit Margin                                                          43
2.13 Net Profit Margin                                                              45
2.13 Summary                                                                                 47
CHAPTER THREE: METHODOLOGY
3.1   Introduction                                                                     51
3.2   Research Design                                                              51
3.3   Population and Sampling Procedure                                        52
3.4   Data Collection Method                                                   52
3.5   Reliability of Research Instrument                                   53
3.6   Validity of Research Instrument                                       54
3.7   Measurement of Study Variables                                     59
3.8   Method of Data Analysis                                                  62


CHAPTER FOUR: PRESENTATION AND ANALYSIS OF DATA
4.1   Introduction                                                                     64
4.2   Descriptive Statistics                                                       64
4.3   Testing of Hypothesis                                                       69
4.3.1 Hypothesis 1                                                                   70
4.3.2 Hypothesis 2                                                                   72
4.3.3 Hypothesis 3                                                                   75
4.3.4 Hypothesis  4                                                                  77
CHAPTER FIVE: DISCUSSION OF FINDINGS, CONCLUSION AND RECOMMENDATION
5.1   Discussion of Findings                                                    81
5.2   Implication of Findings                                                    86
5.3   Conclusion                                                                      87
5.4   Recommendations                                                           88
5.5   Suggestions for further studies                                        91
5.6   Contribution to knowledge                                              94
Bibliography
Appendices


LIST OF TABLES
Table 1:    Measurement of HRA Variables                       57
Table 2:    Employees’ acquisition cost index                   65
Table 3:    Employees’ Replacement cost index                65
Table 4:    Employees’ Separation costs index                  66
Table 5:    Employees’ acquisition costs (2007-2011)               66
Table 6:    Employees; replacement costs (2007-2011)     67
Table 7:    Employees’ separation cost (2007-2011)         67
Table 8:    descriptive statistics on the major
variable  of the study                                                       68
Table 9:    Sample composition of return on asset
(2007-2011)                                                                     68
Table 10:  Sample composition of return on equity
(2007-2011)                                                                     69
Table 11:  correlation analysis showing the
Relationship between employee’ acquisition cost and
gross  profit margin                                                          70
Table 12:  Correlation analysis showing the relationship
Between employees replacement cost and gross profit
Margin                                                                             73
Table 13:  Correlation analysis showing the relationship
Between separation cost and gross profit margin             75
Table 14:  correlation analysis showing the relationship
Between the variables of the study                                  77
ABSTRACT
This study examines the relationship between human resource accounting costs and corporate profitability of manufacturing organizations (10 selected companies) during a period of 5 years. We tested to ascertain whether human resource variables are significant determinants of corporate profitability. We correlated 3 human resource variables as well as all the variables of the study in Cascio’s behavioural model. We found that (1) acquisition and separation costs are positively associated with gross profit margin (2) replacement cost is negatively associated with net profit margin. Consequently the study revealed that all the variables of the study are significant at 0.05 and 0.01 levels. However, there is implication that concentration on replacement costing may not enhance returns. While embarking on certain job enrichment programmes will increase the efficiency and effectiveness of employees which can also be utilized as a benchmark measurement for inter-company comparison in the same industry. Consequently the findings of our study suggest beside other recommendations that adopting the Cascio’s behavioural costing model which considers all the characteristics of human resources will yield desired result.


CHAPTER ONE
INTRODUCTION
1.1      BACKGROUND OF THE STUDY
The major objective of every business is to earn profit. Pandey, (20120) emphasizes that a company should earn profit to Survive and grow over a long period of time. Profit are essential, it is a fact that sufficient profit must be earned to sustain the operations of the business to be able to obtain funds from investors for expansion and growth and to contribute towards the social over heads for the welfare of society. Profits are the difference between revenue and expenses over a period of time (usually one year). Profit is the ultimate “output of a company and it will have no future if it fails to make sufficient profits. Therefore, the financial manager continually evaluates the efficiency of the company in term of profit. The profitability ratios are calculated to measure the efficiency of the company, creditors and owners are also interested in the profitability of the firms. Creditors want to get interest and repayment of principal regularly. Owners want to get a required rate of return on their investment. This is possible only when the company earns profit. Corporate profit represents the portion of the total income earned from current production that is accounted for by corporation. The estimate of corporate profit are an integral part of the national income and produce (NIP) that provides a logical and consistent framework for presenting statistics on economic activity. Andrew et al, (2011). Corporate profits is one of the most closely watch financial indicators. Profitability provides a summary measure of corporate financial health and this serves as an essential indicator of financial performance. Profits are a source of retained earnings providing much of the funding capital investments that raise productive capacity. The estimate of profits and of related measures may also be used to evaluate the effects on corporate of changes in policy or economic conditions. Robert et al (2001).
The biggest barrier to profitability is ignorance by many people about how the company makes money and how, it achieves its objectives, and all of the sales interdependent on each other. In today’s business environment profitable organization problems using multi-disciplinary teams.
The concept of Human Resource (HR) as a Profitability contributor is fast gaining currency in global businesses and bears closer examination. Professor David Ulrich of the University of Michigan a leading expert on HR competency Models, sees the changing business world as 20-20-60 Proposition. 20% of executive surveyed currently use HR as active and innovative business solution partners. 20% believe that HR should remain as administrative overhead and only perform transactional work. It’s the 60% who are starting to expect HR to partner with other departments to improve the company’s core competencies and competitive advantages. And more HR people are stepping up to the plate and delivering the goods.
What is driving this thinking? The Short Answer is completive pressure in a fast changing business world- pressure for sales, talent, and profits. Most (CEO’S and their CFO’S) are held accountable for three general but powerful results. Increasing revenue, generating cash, and reducing costs. In order to focus on these three accountabilities paradigms that no longer work are being discarded as companies seek to stay in and grow their business. HR as a strictly administrative overhead and resource consumer is one of the paradigm under justifiable attack. Transactional HR activities such as payroll benefits and administration and record keeping should be with significant cost savings. To many CEO’S and CFO’S, HR as a revenue enhancer takes some getting used to. That’s not the way they were taught. They are more interested in the payoff and are asking appropriate questions. What’s in it for the company? Where is the improvement in the revenue stream? Once they get solid answer to these questions from competent HR leaders, the CEO’S are quick to change their thinking. Hence an adequate human resource accounting would definitely impact on the corporate profitability of the firm. The extents to which an organization can practice human, asset accounting treatments have strong relationship with its profitability. As pointed out by chin and Lin (2002), a company can actually “loose its competitive edge when making cost reduction decision by cutting down on human asset investment instead of human assets expenses”.
Some empirical studies have been carried out on Human Resource Accounting and Corporate Profitability. Delaney and Huslid, (1996) in their study, classified Capitalized Human Resource cost into acquisition and development cost found that human resources management practices are related to the development of the Human Resources of the Firm. Becker and Gerhard (1996); Guest (1997); Becker and Huslid, (1998) also in their studies on HRM and firm performance conducted in other geographical settings separately found that Human Resources cost have an economically and statistically significant impact on turnover and Corporate Productivity.  Chen and Lin (2002) also in their Study, the Role of Human Capital Cost in Accounting found that Human Asset Investment is an Input made by Company in Talents and Technology that benefits Competitive Advantages are valuable and unique, and which should be kept out of reach of other companies. Shalinis and Shulda, (2010) examined the application of Human Resource Accounting in Heavy Industries to determine the value of production per employee is increasing from 2001-02 to 2009-10. And the manpower is decreasing from 2001-02 to 2009-10 due to retirement. However, these studies are not concentrated on the value of Human Resource Accounting to Corporate Profitability.
This Study Examine Human Resource Accounting and the Level of Profitability of Listed Manufacturing Firm in Nigeria.
1.2      STATEMENT OF THE PROBLEM
In His contribution to the Objectives of Business Organization Dinayak Shenoy assert that every business is started to earn Profit as it is essential for survival and growth of business enterprise. According to him, profit earning should be regarded as the main objective of units. The need of profit in a business is left to cover the cost of production and also create a surplus for undertaking expansion and diversification work. The survival of the business will be day-dreaming affairs in the absence of profit. Because of the importance of profit to business it has been rightly told that profit can be no more than the objective of a Business that eating is to the objective of living.  Stephen Carter also argued that high corporate profit are a good thing, and pursuit’ of high profits is what motivate competition. Therefore follows that a company that has high profits over ad sustained period is simply exceptional at are a good thing, and ‘pursuit’ of high profits is what motivate competition. It therefore follows that a company that has high profits over a sustained period is simply exceptional is innovating ahead of the competition for years on end.
People and the Bottom line, an in-depth two-year study by the work foundation and the institute for Employment Studies, tested a range of people management practices with almost 3,000 employees to assess their impact on organizational performance. It found that businesses with good HR Practices-from resourcing to employee engagement and skills development, enjoyed higher Profit Margins and Productivity than those without. The study concluded that if an organization increased its investment in HR by just 10% it would boost gross profits by $1,500 per employee per year. The pertinent question to ask this juncture therefore is how does the company make money? How does it achieve its objectives? And how are all of the silos interdependent on each other? Today’s business environment demands therefore that profitable organizations possess highly skilled employees who can solve problems using multi- disciplinary terms.   
A number of studies have investigated human resource accounting and firms profitability e.g. MacDuffie, (1995); Koch and McGrath, (1996); Kodwani and Tiwari; (2007), Scholz et al, (2008) but none of these studies adopted the Casio’s behavioral Human Resource Cost Approach. In Nigeria few studies have emerged on Human Resource Accounting and Firms Financial Performance. Okpala and Chidi., (2002) observed that the quality of human Capital is a Major Factor in determining the value of firm’s Stock and Investment Decision in Nigeria. Bassey and Artizeh, (2012) also observed that capitalized Human Resource and its influence on Corporate Productivity Provides relatively strong support for the existence of a positive relationship between human resources cost and the performance of Nigerian Corporations.
Micah et al, (2012) focused on firm’s financial performance and human resources accounting disclosure and found that there is positive correlation disclosure which supports that an increase in return on equity encourages firm in reporting human capital information so as to Establish trustworthiness with shareholders, enhance external reputation so as to establish legitimacy in Nigeria Financial Markets.
However, none of these studies has empirically examined the association between human resource accounting and Corporate Profitability in Nigeria using Cascio’s behavioural costing Model hence this study. Consequently, the study seeks to fill a gap in the existing literature by examining the relationship between human resources accounting and profitability of manufacturing firms in Nigeria Stock Exchange.
1.3      PURPOSE OF THE STUDY
        The main Purpose of this study is to determine the level of association between human resource accounting and profitability of quoted manufacturing organizations in Nigeria. Specifically, the study aims at achieving the following.
1.     To determine the relationship between acquisition cost and gross profit margin.
2.     To examine the extent to which employees’ replacement cost relates to net profit margin.
3.     To evaluate the rate at which employees separation cost relates to gross profit margin.
4.     To examine the relationship between human resource accounting costs and Corporate Profitability.
1.4   RESEARCH QUESTIONS
Based on the objective of the study, the following questions are raised to guide study.
1.     What is the relationship between employees acquisition cost and gross profit margin?
2.     To what extent is employees’ replacement cost associated with net profit margin?
3.     what is the relationship between employees’ separation cost and gross profit margin?
4.     To what extent do human resource accounting costs relate to corporate profitability?


1.5   RESEARCH HYPOTHESIS
The following null Hypotheses are postulated
H01:  Employees’ acquisition cost does not significantly relate to gross profit margin.
H02:  Employees’ replacement cost does not significantly relate to net profit margin.
H03:  Employees’ separation cost does not significantly relate to gross profit margin.
H04:  Human resource accounting cost does not significantly relate to corporate profitability.
1.6   SIGNIFICANCE OF THE STUDY
The findings of the study will aid potential and existing creditors and share-holders on how to ascertain profitability especially in terms of gross profit margin and net profit margin. It will assist analysts of financial statement for quality profitability information. It will enable government, policy makers, management; students of business schools and other users of financial statements ascertain extent of relationship of human resource accounting and profitability and its implication on corporate profitability in Nigeria.
Finally, it will add to existing body of knowledge in human resource accounting and the finding will stimulate further research in this area of study to enhance the profitability of manufacturing firms in Nigeria
1.7   SCOPE AND LIMITATION OF THE STUDY
This study was restricted to a number of factors.
1.     Scope of the Study: The scope of this study is one of the limitations of the study. The geographical scope of the study covers only listed manufacturing firms in Nigeria.
2.     Challenges in obtaining data from published financial statement from the Nigeria Stock Exchange. Consequently, available data on the studied companies was limited to a period of five years.
3.     Finally due to the fact that this research is an academic study money and time constrain also a limiting factor.

1.8   CONCEPTUAL DEFINITION OF TERMS
Ø    Human Resources: This is the sum total of the employee of an organization or its’ workforce.
Ø    Human Resource Accounting: It is the process of identifying the human resource of an organization, quantifying them in the monetary terms and shows them on the balance sheet.
Ø    Human Resource Management: Consists of the policies, practices and system of an organization that influences employees’ behaviours, attitudes and performance.
Ø    Human Resource: Is that part of an organization’s capital represented by the ability, experience, training and skill of its workforce or employee.
Ø    Cost: Cost means a sacrifice forgone or the giving up of something to acquire another, usually measured in monetary terms.
Ø    Corporate Profitability: This refers to the progress expressed in monetary terms which a firm has made over the use of her resource and usually shown or reported in financial statements.
Ø    Financial Indicators: These are measures or indices put in place to ascertain the extent of firms financial performance such as gross profit Margin net Profit Margin.
Ø    Financial Markets: This refers to market where short term financial instruments are traded on.
Ø    Gross Profit Margin: This refers to sales minus cost of goods sold over sales.
Ø    Net Profit Margin: This refers to profit after tax over sales.
Ø    Creditors: Those who make funds and other business resources available to the business firm in expectation of returns.
Ø    Balance Sheet: Is a statement of the total assets and liabilities of an organization at a particular date.
Ø    Profit and Loss Account: This is an income statement that shows the revenue generated by a business firm over cost or expenses incurred in a particular period.
1.9   ORGANIZATION OF THE STUDY
This study was organized into five chapters. The first chapter provides a general introduction to the study. In this research, hypothesis, scope and limitation of the study, significance of the study and conceptual definitions of terms are examined.
Chapter two focused on a review of related literature where issues such as theoretical framework concept of corporate profitability as well as other conceptual variable adopted in the study were discussed.
Chapter three examined the research methodology to be adopted in the study. This include research design, population sampling procedure and data collection method, operational measures and data analysis.
Chapter four concentrates on the analysis of data and tests of hypothesis while chapter five provides discussion of findings that emerged from the analysis of data, conclusion, and recommendations, suggestions for further studies and contributions to knowledge.




AFFILIATE LINKS:





Comments

Post a Comment