Abstract:
This research examines the effect of human capital investment on the firm’s
performance in South African companies. This research is important given that the
human asset has been proven to be one of the most important assets in the
organisation and therefore this research set out to examine whether human assets
actually contribute to the performance of the firm in the Johannesburg Stock Exchange
Social Responsible index (SRI).
Therefore the objective of this research was to examine the relationship between
human capital investment and firm performance in terms of sales turnover, share price
and net profit. Secondary data on human capital investment and companies’
performance (sales turnover, net profit and share price) were collected from integrated
report archives of the 28 best performing companies in the JSE SRI Index for the six
years from 2010 to 2015. The theoretical foundation was on the human capital theory
and related previous literature. The research adopted a quantitative paradigm and
applied the regression statistics, which were analysed with the aid of the excel
software. Findings from the regression analysis indicate p value of 0.04 for HCI and
sales turnover, p value of 0.69 for HCI and the share price and p value of 0.16 for HCI
and net profit. This therefore, means that, within the sample of companies, there is a
significant relationship between human capital investment and sales turnover of firms
and no significant relationship between human capital investment and share price, and
net profit of companies. This finding indicates that the result may change from
negative to positive with a longer period of data. Over the long term companies that
invest in HC would experience profitability (within a range of 10 to 13 years) (Blundell
et al, 1999).This means that future research should use a longer period of data and
include more companies outside of the JSE SRI Index companies. The research
recommends that there is a need for companies to invest in human capital to improve
companies’ performance and to win customers’ confidence.
