Market Valuation of Human Capital in Nigerian Banks

Abstract

This paper examines the effect of human capital on the market value of banks in Nigeria, using data on three proxies of human capital related to remuneration and staff strength. Relevant financial statement data (for the period 2010 to 2014) were extracted from the annual reports and accounts of fourteen banks listed on the Nigerian Stock Exchange. Results of regression of stock price on the human capital indicators show that only one variable-the proportion of highly paid employees-had a significant effect on the market value of firms. The findings suggest that investors' confidence increases with the strength of valuable stock of human capital in the payroll of banks. Banks that are unable to retain a high proportion of highly paid employees in their staff structure may consider merging with other banks to sustain investors' confidence. The study also has implications for the remuneration committees of banks as the proportion of highly paid employees at the firm level affects the confidence of equity investors.