RESOURCE DISCLOSURE PRACTICE QUALITY OF BANGLADESHI COMPANIES
Table of Contents
Problem statement 2
Research Question. 2
Purposes of the study. 2
sustainable approach to entrepreneurship is growing. With this trend importance
of sustainability reporting, which includes reporting on human resources also
increases. Where human resources are fundamental for any company, new
information needs exist for the company’s shareholders and stakeholders. They
demand information on questions related to the creation of value where
intangible assets, especially the human element, is of maximum importance, and
about social responsibility compliance, where information about the employees
is fundamental. In this study I examined the existence and extent of reporting
on human resources in annual reports of the garments sector companies
registered under the Dhaka Stock Exchange of Bangladesh which belong to
selected industrial sectors. Under this study I investigated the potential
determinants of the level of disclosure on human resources practices. The
results point out that HR disclosure quality level is very low among the sample
companies. The ordinary least squares regression (OLS) analysis results
indicate that the level of HR disclosure quality is associated with company’s
employees expenses as a proportion of its total operating expenses”,
whereas profitability, do not have significant influence on its level of HR
Keywords – HR
Disclosure Quality, Intellectual Capital, Bangladesh, Employees’ expenses.
In the knowledge
economy, with the increasingly important role of knowledge, professional skills
and abilities in product manufacturing and service delivery, effective
management and reporting of human capital is imperative for organizations
seeking for performance enhancement. In this sense, the study on corporate
disclosure of intellectual as well as human capital has received growing
research attention. Nevertheless, the extant research of intellectual or human
capital disclosure focuses on the antecedents or influencing factors of
engaging the reporting activities and international or industry segment
comparisons of the reporting practices. The resulting performance implication
of human capital disclosure is still not well addressed, theoretically or
empirically in developing countries such as Bangladesh. Human, materials,
machines, implies money and strategies are the assets required for an
association. These assets are comprehensively ordered into two classifications,
viz., vivify and lifeless (human and physical) assets. Human, also called the
HR, are thought to be energize assets. Others, in particular, materials, machines,
cash and strategies are thought to be lifeless or physical assets. Assets are
on the whole human, material, genuine and fiscal components that can be
attracted and utilized the creation of monetary products to fulfill social
needs (Dobrota, 1999, p.159). Because of the new economy, learning based
economy it has been presumed that HR turns out to be progressively more
critical in deciding the aggregate estimation of an association. HR alludes to
an arrangement of information and fitness, aptitudes and preparing, advancement
and capacities, states of mind and aptitudes, learning capacity and inspiration
of the general population who frame the association (Ionel et al., 2010). In
spite of the fact that the specialized establishments, hardware or money related
capital are imperative, HR, specifically, essential (Armstrong, 2001). The
conventional approach is to regard individuals as simple
“consumption” or in the bookkeeping approach inclination as
negligible costs attested by (Manolescu, 2003). Joint human asset worldview is
inadequate and restricted. It takes your psyche to a consumable asset compose
at a cost and thusly the organization as far as limiting expenses. As a matter
of fact it is around a basic vital component in the organization’s future, it
is about HR. HR incorporate the consolidated learning, aptitude,
innovativeness, creativity and capacity of every worker of a firm to lead
routine exercises. It additionally incorporates the organization’s esteems, its
way of life and theory (Ionel et al., 2010). So the disclosure of human
resource capital is a vital need now a days.
Bangladesh is a
developing country and it has many natural resources. As a result of that many
new companies in different industrial sectors are evolving in the country
specially garments as there are lots of demand from the foreign countries.
There are being recruited many workers as well as professionals. As a result it
is sensible to trust that Bangladeshi companies demonstrate a bit by bit
developing enthusiasm for detailing devices on HRD in their yearly reports as
there are less disclosures about human resource capital in the company’s
financial statements. After shedding some light on the importance of disclosure
the question that needs to be answered is: What is the level of HR disclosed
quality in annual reports of the Bangladeshi stock registered garments
companies and are the companies’ characteristics associated with the level of
HR disclosure quality.
Q1. What is the level
of HR disclosure quality in annual reports of the Bangladeshi stock registered
Q2. Are the companies’
characteristics associated with the level of HR disclosure quality?
Purposes of the study
In view of less research
has concentrated on the nature of HR disclosure, driven by this contention
explored the level of HR disclosure quality in Bangladesh. The examination
additionally distinguished the variables that impact the level of HR
disclosure. Subsequently the overall objectives of the present investigation
are as per the following:
To determine the level
of HR disclosure quality in annual reports of the Bangladeshi stock registered
2. To determine whether
certain company characteristics associated with the level of HR disclosure
H1. There is a positive association between
company’s profitability and level of HR disclosure quality.
In earlier studies
reported mixed results of the relationship between HR disclosure and profitability.
For example, Williams (2001) noticed a significantly inverse relationship
through investigating 40 UK companies. Sonnier et al. (2007) reach to similar
findings through examining 143 high-tech companies in the US. However
Garcia-Meca et al. (2005) and Li et at (2008) found a significantly positive
relationship in spain and UK respectively. Ahmed (2009), Hossain (1998), Owusu
Ansa’ (1998). Inchausti (1997), Raffournier (1995); Wallace and Nascr (1985)
and Wallance(1987) used Profitability in disclosure studies as independent
variable. Hossain (1998) identified that profitability is capable of
influencing the level of corporate information disclosure. Owusu-Ansah (1998)
found that unprofitable companies are also inclined to release more information
to defend their poor performance. Lang and Lundholni (1993) noted that the
influence of a company’s profitability level on disclosure can be positive,
neutral or negative, depending on its performance. But the study of Belkaoui
and Kahl (1978) found a negative relationship between profitability and level
H2. There is a positive association between
company’s employee expenses ratio and level of HR disclosure quality.
Jindal et al. (2012) in
their investigation uncover that human capital disclosure Score is decidedly
corresponded with the employee expenses as an extent of their aggregate working
expenses. This basically implies the organizations in which employee expenses
constitute a greater part of operating expenses are the ones which reveal more
on the HC front. Other investigation of Wright and Snell (2005) demonstrated
that value in knowledge based economy can be made by better training,
development and retention of the employees. This improved estimation of firm, with
better HR exercises, can’t be accounted for on the balance sheet. It must be
accounted for to its financial users through HC disclosure. Consequently, HC
disclosure should increment with the expanded measure of spending on workers.
With the developing information economy the employee expenses of the Indian
organizations have expanded commonly. Subsequently, this investigation guesses
that the organizations with a more noteworthy extent of their working expenses
put resources into workers’ pay ought to have noteworthy positive effect on the
degree of their HC disclosure quality.
Based on sample annual reports of Bangladeshi companies from garments sectors
which are listed in Dhaka Stock Exchange, the results support the expectation
that the quality level Human resources accounting disclosure is low. The result
is supported by other study performed Md Habib-Uz-Zaman Khan in Bangladesh
(2010) who examined the CSR disclosure practices of selected public listed
companies in Bangladesh. The study reveals that the level of CSR is low among
Bangladeshi companies. This study also supported by earlier studies performed
in emerging economy country contexts (for example, Belal (2001) for Bangladesh,
Naser and Baker (1999) for Jordan; Savage (1994) for South Africa). All of
those studies revealed that the extent of CSRR disclosure is also very low and
this results. The company’s characteristics variables are the profitability and
ratio of employee expenses to total operating expenses. The multivariate
regression analysis show that profitability has negatively correlated with HRA
disclosure Scores and employee expenses is positively correlated with HRA
disclosure Scores. This result supported by (Jindal et at., 2012).
In summary, the
objectives of this research were (1) to describe the extent of what is the
level of HR disclosure quality in annual reports of the Bangladeshi stock
registered garments companies and (2) Are the companies’ characteristics
associated with the level of HR disclosure quality? As there is few previous
study in the field of CSR in Bangladesh before, this study presents an overall
picture of HRA disclosure in Bangladesh and offers recommendations to
regulators who are interested in improving, monitoring and enforcing the
adequacy of HR disclosure in Bangladesh and also to companies who are willing
to enhance the HR practices within their own companies.
Accounting Information of an organization is very important factor to decision
makers in the era of knowledge based economy. As a result, each organization
takes serious attempt to disclose its HRA information to insiders and outsider
decision makers. In fact, it is becoming an integral part of management report.
This study initiates to reveal the disclosure quality of HR of listed garments
companies in Bangladesh. Its results shows that there is a positive association
between company’s profitability and level of HR disclosure quality and also
there is a positive association between company’s employee expenses ratio and
level of HR disclosure quality. In addition, the results also find the
financial companies are disclosing HRA information than non-financial companies
and company’s profitability positively influences companies to report the
information in their annual report. Hence, regulation structure in Bangladesh
is enhancing the disclosure practice particularly in the area of HRA
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