HUMAN CAPITAL MEETS FINANCIAL STRUCTURE: ROLE OF EMPLOYEE MANAGEMENT IN SHAPING CAPITAL STRUCTURE
Keywords:
Corporate Finance, Employee Management, Firm SizeAbstract
This study examined the relationship between employee management costs and capital structure decisions among listed banks on the Nigerian Exchange Group (NGX). Specifically, it investigated how employee management costs influenced equity finance and debt finance, with firm size as a moderating variable. The study utilized data from 13 banks over the period 2014 to 2023, employing a correlation analysis within an ex post facto research design to explore these relationships. The findings revealed a significant positive correlation between employee management costs and equity finance (r = 0.134, p < 0.05), indicating that higher investment in employee management was associated with increased reliance on equity financing. Conversely, the relationship between employee management costs and debt finance was positive but weak (r = 0.031, p < 0.05). Additionally, firm size showed a strong positive correlation with employee management costs (r = 0.752, p < 0.01) and equity finance (r = 0.301, p < 0.01), suggesting that larger banks were more likely to leverage employee management investments to favor equity over debt financing. The study concluded that effective management of human capital plays a crucial role in shaping banks’ capital structures, particularly in encouraging equity financing. It also highlighted that firm size significantly moderated this relationship, emphasizing the need for banks to integrate employee management and organizational scale into their financial decision-making processes. These insights provide valuable guidance for bank managers and policymakers aiming to optimize capital structure strategies through human resource investments
References
Abor, J. (2017). Corporate governance and capital structure decisions of firms in Sub-Saharan Africa. Journal of African Business, 18(1), 124–141.
Abor, J. (2020). Corporate finance and investment: Decisions and strategies in developing countries (2nd ed.). Palgrave Macmillan.
Adebayo, S. M., & Adedeji, O. J. (2021). Human capital development and firm productivity in Nigeria: Evidence from the banking sector. Journal of African Business, 22(3), 317–335.
Ahmed, S., & Abdullah, M. (2020). The impact of financial structure on firm performance: Evidence from listed non-financial companies in Bangladesh. International Journal of Financial Research, 11(4), 255–263. https://doi.org/10.5430/ijfr.v11n4p255
Ajayi, M. A., & Salami, O. A. (2021). Human capital investment and financial performance of selected banks in Nigeria. Journal of Banking and Financial Economics, 9(2), 34–47. https://doi.org/10.2139/ssrn.3829132
Akintoye, I. R. (2019). Capital structure decision and corporate performance in Nigeria. Journal of Finance and Economics Research, 4(1), 37–46.
Akinyemi, A. A., & Olayemi, A. M. (2021). Capital structure and firm performance in Nigeria: Evidence from non-financial firms. Journal of Economics and Sustainable Development, 12(4), 45–54.
Akinyomi, O. J., & Olagunju, A. (2020). Human resource cost and financial performance of manufacturing firms in Nigeria. International Journal of Business and Management Invention, 9(5), 18–23.
Al-Shubiri, F. N. (2015). The impact of human capital on the financial performance of public banks in Jordan. Investment Management and Financial Innovations, 12(2), 67–78.
Azeez, L. O., & Salami, A. O. (2019). Determinants of capital structure in Nigerian manufacturing firms. Journal of Accounting and Taxation, 11(3), 45–56.
Becker, G. S. (2018). Human capital: A theoretical and empirical analysis, with special reference to education (3rd ed.). University of Chicago Press.
Bello, A., & Adamu, J. (2022). Firm size, human capital and capital structure of listed banks in Nigeria. Nigerian Journal of Management Sciences, 11(2), 105–117.
Boateng, A., Hua, X., Uddin, M., & Du, M. (2016). Does firm-specific intangible capital matter in cross-border acquisitions? Evidence from Chinese M&A deals. International Business Review, 25(3), 839–847. https://doi.org/10.1016/j.ibusrev.2015.11.005
Bokpin, G. A. (2016). Financial structure and firm value: Evidence from selected African countries. International Journal of Emerging Markets, 11(4), 532–550. https://doi.org/10.1108/IJoEM-01-2014-0010
Brealey, R. A., Myers, S. C., & Allen, F. (2020). Principles of corporate finance (13th ed.). McGraw-Hill Education.
Central Bank of Nigeria (CBN). (2023). Financial stability report. https://www.cbn.gov.ng/documents/financial-stability/
Chen, J., & Chen, J. (2018). Firm size and capital structure decision: Evidence from China. Asia-Pacific Journal of Financial Studies, 47(2), 175–200. https://doi.org/10.1111/ajfs.12206
Edmans, A. (2017). Blockholders and corporate governance. Annual Review of Financial Economics, 9(1), 121–145. https://doi.org/10.1146/annurev-financial-110716-032845
Ezeoha, A. E. (2019). Human capital cost and capital structure: Evidence from sub-Saharan African countries. African Review of Economics and Finance, 11(1), 39–56.
Falope, O. I., & Ajilore, O. T. (2018). Working capital management and corporate profitability: Evidence from panel data analysis of selected quoted companies in Nigeria. Research Journal of Business Management, 12(2), 76–89.
Frank, M. Z., & Goyal, V. K. (2015). Trade-off and pecking order theories of debt. In Handbook of Empirical Corporate Finance (Vol. 2, pp. 135–202). Elsevier. https://doi.org/10.1016/B978-0-444-53265-7.50004-4
Gatsi, J. G., & Akoto, R. K. (2021). Human capital disclosure and capital structure decisions: Evidence from listed Ghanaian firms. African Journal of Economic Policy, 28(1), 55–72.
Ioraver, C. M., & Okpe, I. I. (2021). Human capital development and the financial performance of selected listed manufacturing firms in Nigeria. International Journal of Economics and Business Management, 7(1), 120–131.
Ismail, W. K. W., & Abdul Rahman, R. (2020). The effect of intellectual capital on firm performance: Evidence from Malaysian technology industry. Asian Journal of Business and Accounting, 13(1), 93–123.
Jensen, M. C. (2017). Agency costs of free cash flow, corporate finance, and takeovers. American Economic Review, 76(2), 323–329.
Kim, Y., & Ployhart, R. E. (2018). The strategic value of human capital: A review and synthesis. Human Resource Management Review, 28(4), 395–410. https://doi.org/10.1016/j.hrmr.2018.02.005
Lawal, A. I., & Hassan, S. U. (2019). Corporate capital structure and firm value: Empirical evidence from Nigeria. Nigerian Journal of Economic and Social Studies, 61(2), 43–61.
Musa, A., & Shehu, U. H. (2016). Human resource investment and capital structure: Evidence from listed industrial firms in Nigeria. International Journal of Business and Management Studies, 5(1), 65–78.
Myers, S. C. (2020). The capital structure puzzle. The Journal of Finance, 39(3), 575–592.
Nguyen, H., & Nguyen, T. (2020). Human capital, firm performance and capital structure: Empirical evidence from Vietnam. Journal of Asian Business and Economic Studies, 27(3), 289–308. https://doi.org/10.1108/JABES-11-2019-0103
Obradovich, J., & Gill, A. (2015). Capital structure and firm performance: Evidence from Canada. International Journal of Economics and Finance, 7(9), 183–191. https://doi.org/10.5539/ijef.v7n9p183
OECD. (2019). Human capital investment: A new framework for assessment. OECD Publishing.
Olalekan, A., & Adebayo, O. (2017). Capital structure and financial performance in Nigeria. International Journal of Business and Social Science, 8(1), 114–123.
Olayemi, A. O., & Afolabi, M. A. (2021). Human capital development and financial structure of selected firms in Sub-Saharan Africa. Global Journal of Management and Business Research, 21(3), 27–39.
Olokoyo, F. O. (2018). Capital structure and corporate performance of Nigerian quoted firms: A panel data approach. International Journal of Economic Policy in Emerging Economies, 11(2), 154–171.
Olowe, R. A., Adebayo, S. M., & Aladejana, A. I. (2022). Determinants of capital structure of Nigerian firms: Evidence from the banking sector. Nigerian Journal of Economic and Financial Review, 14(1), 65–82. https://doi.org/10.5281/zenodo.7290146
Osuma, G. O., & Okolie, A. O. (2022). Human resource accounting and firm profitability: Evidence from listed service companies in Nigeria. Journal of Accounting and Financial Management, 8(4), 45–56.
Schultz, T. W. (1961). Investment in human capital. The American Economic Review, 51(1), 1–17.
Titman, S., & Martin, J. D. (2018). Valuation: The art and science of corporate investment decisions (3rd ed.). Pearson.
Umar, M., & Kabir, M. R. (2017). Determinants of capital structure: Empirical evidence from large taxpayer companies in Nigeria. Journal of Finance and Accounting Research, 3(2), 1–14.
Uwalomwa, U., Uwuigbe, U., & Egbide, B. C. (2018). Corporate governance and capital structure decision of listed firms in Nigeria. *International Journal
World Economic Forum. (2022). The future of jobs report 2022. https://www.weforum.org/reports/the-future-of-jobs-report-2022
Yazdanfar, D., & Öhman, P. (2015). Debt financing and firm performance: Evidence from Swedish SMEs. Journal of Risk Finance, 16(1), 102–118. https://doi.org/10.1108/JRF-06-2014-0071
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2025 British International Journal of Applied Economics, Finance and Accounting
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
