✅ The Information Content of Human Capital and Tangible Capital Related Measures - Working Paper

The study assesses the question of whether human capital measures yield incremental information content compared to tangible capital measures. This is motivated by the two arguments that (1) human capital is an important factor of company success and (2) human capital measures show a different persistence than tangible capital measures. To answer the question, the residual income model (RIM), the tangible capital model (TCM) and the tangible and human capital model (THCM) are compared in terms of information content. Several regressions of the three models are carried out for levels and changes analysis with a differentieted view on positive and negative residual income for 367 (299) German based companies during a period from 1991 to 2006 resulting in a total of 2,117 (1,750) observations for levels (changes) analysis. A panel approach is used with period fixed effects and White heteroscedasticity consistent covariance estimator. Findings reveal a general support for disaggregating RIM into TCM, and also suggest that THCM dominates TCM in levels analysis if positive residual income is reported and in changes analysis if no distinction is made between positive and negative reported residual income. Additionally, findings remain constant across three different discount rate scenarios with the capital asset pricing model (CAPM), the risk free discount rate and a constant discount rate, with some exceptions for negative residual income cases and in some applications of changes analysis.

Autor

Prof. Dr. rer. pol. habil. Thomas Günther
Dipl.-Wirtsch.-Ing. Frank Schiemann