Title : Spending on human resources: Cost or investment? -a developing country perspective

Authors : Quazi Tafsirul Islam, Rubaiya Nadia Huda, Rifat Iqbal

Abstract : Purpose of the research: The purpose of this research is to study the impact of Human Resource (HR) spending on the financial performance of companies in Bangladesh and contribute to the limited research on HR Investment from a developing country perspective. We examine whether spending more money on HR leads to increased financial performance. Design/methodology: We collected secondary data published in annual reports of listed banks in Bangladesh that represents a human capital-intensive industry. Then, we tested our hypothesis by using SPSS. Multivariate regression analysis is run on panel data of 29 privately owned banks listed in the Dhaka Stock Exchange, over 5 years (2013 to 2017). HR expense, which includes compensation and training, is used as a proxy of HR spending, and Return on Asset (ROA) is used as an indicator of financial performance. A variety of bank-specific variables and industry factors are used as control variables. Results/findings: Results show that HR investment has a significant positive impact on banks' ROA. This means that an increase in spending in HR would very likely lead to an increase in ROA. This finding is in line with previous researches, which highlighted that when companies spend more on HR and consider employees as a value-creating source, employees become more motivated and contribute more. This enhances the Company's financial performance. Practical implications and Conclusions: This study holds several managerial implications. Firstly, it challenges traditional management's belief to consider employees as costs. It emphasizes that money spent on employees in the form of salary, training, and other benefits should be considered as significant investments rather than mere operational costs. Secondly, investing more in training can help employees acquire new skills and gain more knowledge. Finally, a competitive salary can enhance employee morale and assist in employee retention.

Journal : Volume : Year : 2019 Issue :
Pages : 115 City : Dhaka Edition : 5 Editors :
Publisher : CBER UK ISBN : 2047-2862 Book : Chapter :
Proceeding Title : Conference proceedings of the Centre for Business & Economic Research (CBER) The Business and Management Review Institution : Issuer : Number :