The Stock Market Value of Human Capital Creation

44 Pages Posted: 9 Oct 2020

See all articles by Ethan Rouen

Ethan Rouen

Harvard Business School

Matthias Regier

TUM School of Management

Date Written: October 2, 2020


We develop measures of firm-level human capital creation from publicly disclosed personnel expenses (PE) and examine the stock market valuation of these characteristics. Separately measuring human capital creation efficacy and opportunity, we first show that efficacy is positively associated with characteristics of human-capital-intensive firms and employee productivity growth. Next, we find that efficacy has a positive pricing coefficient, implying that the market recognizes some of its variation. In our main analysis, long-short portfolios based on the human capital creation efficacy (opportunity) produce annualized abnormal returns of 4.0 to 5.4% (6.0 to 7.5%). Portfolios formed on the combination of efficacy and opportunities produce the strongest abnormal returns of 6.3 to 9.3% in annualized terms. Our results provide evidence of the importance to valuation of accurate human capital measurement.

Keywords: Intangibles, Market valuation, Human capital

JEL Classification: M41, E22

Suggested Citation

Rouen, Ethan and Regier, Matthias, The Stock Market Value of Human Capital Creation (October 2, 2020). Harvard Business School Accounting & Management Unit Working Paper No. 21-047, Available at SSRN: or

Ethan Rouen (Contact Author)

Harvard Business School ( email )

Soldiers Field
Boston, MA 02163
United States
617-495-6275 (Phone)


Matthias Regier

TUM School of Management ( email )


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