Human Capital Disclosure and Firm Value: An Investigation of Kenyan and South African Listed Companies

Kenyan Listed companies have witnessed volatility in firm values as measured by market -to-book value ratio over time. While, corporate disclosure has long been linked with firm value, integrating non-financial with financial information disclosures in a single report as championed through the <IR> framework has not been extensively examined in the African context, specifically on its influence on company value. While, preceding studies in other settings have reported mixed findings, this comparative investigation was intended to find out how disclosure of human capital being one of the fundamental concepts of <IR> capitals affect the value of listed companies in Kenya and South Africa. On the basis of positivist research philosophy, the researcher employed both exploratory and confirmatory research designs. The study was braced on the stakeholder and Legitimacy theories. 209 listed companies formed the population of the study. Out of this population, a sample of 137 companies was purposefully selected, comprising of 19 firms listed in the NSE, Kenya and 118 companies listed in the JSE, South Africa. Data was collected from secondary sources involving audited annual integrated report and financial statements of the targeted companies. Tobin’s Q ratio, was used as a surrogate for Firm Value, as, human capital disclosure was measured using an unweighted disclosure index. Preliminary analyses were conducted, such as descriptive statistics and correlation matrix. To test the hypothesized relationship, regression techniques were employed. The results signify that human capital disclosure has a statistically significant negative effect on firm value for Kenyan listed companies as South Africa affirmed positive and significant results. The study therefore recommends that Kenya listed companies should be obligated to adopt and apply integrated reporting in relation to human capital disclosure aspects as this will not only improve shareholder understanding of financial state