Employee characteristics and their impact on the value of the firm (as indicated by the firm's share price)
thesisposted on 15.12.2014, 10:45 by Kenneth Wayte
This research attempts to establish a link between employee characteristics and the value of the firm. It does this by establishing the characteristics which are considered important and have been identified in the past in the Human Capital Literature. These are then tested, using regression analysis, against the share price to show that a linear relationship exists and examine how "strong" that relationship is.;In order to justify this link it is important that, at least for all practical purposes it can be argued that markets are efficient. The efficient market hypothesis is therefore examined and a conclusion is reached that although there are problems with the hypothesis it can be used as a good working tool.;Once the basic arguments had been made a questionnaire was produced and sent to selected companies chosen from the F.A.M.E. data base. It is this data base that was used together with the completed questionnaires and the London Stock Exchange daily official list as the sources of the raw material with which to test the hypothesis.;A regression was then run (using SPSS/PC) and it was found that after certain modifications to the data set being used were made (explained in detail in chapter seven) there was in fact a linear relationship between employee characteristics and the companies share price.;To strengthen the above hypothesis the effect of layoffs on a firms share price was examined. It can be hypothesised that if the layoffs are reported to be for reasons of efficiency then the share price around the data of the announcement should rise. The research confirmed that the market regards employees as a resource and that the share price falls as the resource is depleted. This then tends to confirm the 'employees as a resource' argument used in the hypothesis.