Investing in human resources increases stock prices
Date
7/29/2024 4:23:00 AM
(MENAFN) A recent study conducted for US retailers has found that companies investing in human resources see an improvement in their stock prices. This research, highlighted by a World Economic Forum blog, emphasizes that in the context of a declining labor force, companies that prioritize human resource practices will gain more significant benefits. Contrary to the common belief that cutting HR costs can enhance shareholder returns, the new study demonstrates that investing in employees leads to increased stock prices over time, among other advantages.
The groundbreaking study by the Rand Corporation, published in May, employed artificial intelligence to analyze around 800 Securities and Exchange Commission (SEC) filings over the past twenty years. The research focused on large, publicly traded retail companies, which collectively employ about 15 million people across the United States, predominantly in entry-level positions. Since 2020, the SEC has mandated that companies disclose their "human capital management" practices, detailing their strategies for attracting, developing, and retaining workers.
Using an AI model, the RAND Corporation assessed the disclosures of retail companies regarding their investments in front-line workers. The findings revealed that companies with significant investments in human resources experienced short-term stock price increases of up to 2.5 percent. This study underscores the importance of human capital management in driving financial performance, suggesting that a strategic focus on employee investment can yield substantial returns for shareholders.
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