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Human capital accounting relevance, analysis and reporting in Malaysia

posted on 02.02.2017, 03:09 authored by Samudhram, Ananda
This thesis is composed of seven chapters. The first chapter highlights Malaysia’s aspirations to become a high income economy by upgrading its human capital (HC). The upgraded HC will increase productivity of Malaysian firms and Malaysian firms will be willing to pay higher compensation to employees for this higher productivity, leading to higher household incomes, which will in turn enable Malaysia to become a high income economy. There is little published research on the link between various HC based inputs, firm productivity and other human capital based outputs, in Malaysia. The rest of the chapters examine these links, consider implications of pertinent findings and provide recommendations to enable Malaysia to fine-tune applicable policies to become a high income nation. The second chapter reviews relevant literature in HC accounting and indicates that current HC accounting literature presents two disparate theoretical HC measurement approaches. One of these approaches measures HC in terms of its cost (HC based inputs). The other approach measures HC in terms of its value (HC based outputs). The third chapter of this thesis (published) develops a new theory by suggesting that these cost and value based approaches can be integrated. Based on this new theory, a conceptual framework is formulated, called the human capital valuation framework (HCVF). The HCVF divides human capital based expenditures into four categories, based on the cost-benefit relationships. Chapter four (published) presents an application of this conceptual framework in a Malaysian capital market setting. In chapter four, the conceptual variable termed as HC cost is operationalised as labour costs and the conceptual HC value variable is operationalised as the market value of firms. Chapter four finds that the voluntarily disclosed HC costs (labour costs) are value relevant in the Malaysian setting. As such, policies to promote voluntary disclosures of HC based information are recommended, since investors seem to find these disclosures useful. The fifth chapter (published) applies the new cost-benefit (or input-output) integrated theory in the Malaysian SME (small and medium scale enterprises) setting. The HC based input conceptual variable is operationalised as firm size based on employee headcount. The HC based output conceptual variables are operationalised as value added per employee and output per employee. Chapter five finds that sometimes smaller firms are more productive than larger firms. As such, flexible policies to help SMEs of different sizes to reach their full potential, rather than policies that principally drive growth, are recommended for enabling the Malaysian SME sector to achieve optimal productivity. Chapter six (published) expands on the recommendations presented in Chapter 5, by examining the overall Malaysian SME enabling framework and drafting a complementary supporting structure composed of small business development units (SBDUs) in research intensive universities. The SBDUs could provide a flexible SME support system that tailors the assistance provided for SMEs to the SMEs’ specific circumstances. Chapter seven integrates the overall work, suggesting that SBDUs can help promising SMEs to grow into PLCs. The HC based metrics examined herein can help PLCs and SMEs to make relevant HC based decisions.


Campus location


Principal supervisor

Jothee Sinnakkannu

Year of Award


Department, School or Centre

Accounting and Finance (Monash University Malaysia)


Doctor of Philosophy

Degree Type



Faculty of Business and Economics