HUMAN CAPITAL INVESTMENT AND PERFORMANCE OF QUOTED MANUFACTURING COMPANIES IN NIGERIA

Abstract

The study investigates the influence of investment in human capital on the listed manufacturing 
firms' financial performance in Nigeria. Adopting an ex-post facto design, the study examined 
the experience of 38 listed manufacturing firms during the period 2014-2023. The study 
specifically examined the influence of the efficiency of human capital and employees' 
compensation on the return on assets and the operation expenses. The firms' annual reports 
provided the source of the data that were analyzed using descriptive correlation analysis and least 
square regression analysis. The findings of the study identify that HCE has a positive and 
significant influence on the ROA (β = 1.5329, p < 0.05), indicating that firms with higher human 
capital efficiency experience good financial performance. The employees' compensation also has 
a positive and significant influence on the ROA (β = 1.0265, p < 0.05), indicating that higher 
compensation yields higher profitability possibly with the aid of higher productivity and 
employees' staff retention rates. HCE also has a marginally significant influence on the OPEX (β 
= 0.0631, p < 0.05), indicating that companies that invest in human capital might record higher 
operation expenses with the inclusion of training and staff development expenses. The findings 
emphasize the significance of strategic investment in human capital in influencing the 
performance of the firm while offsetting the associated expenditure. The study advises that 
manufacturing companies optimize human capital efficiency with the development of skills and 
the use of performance-based compensation schemes and adopt the use of optimization of 
expenditure strategies to enhance profitability.