Corporate Human Capital Disclosures: Evidence from the First Two Years of the SEC’s Disclosure Mandate

42 Pages Posted: 15 Jul 2022 Last revised: 15 May 2024

See all articles by Elizabeth Demers

Elizabeth Demers

University of Waterloo

Victor Xiaoqi Wang

California State University, Long Beach - Department of Accountancy

Kean Wu

Rochester Institute of Technology (RIT) - Saunders College of Business

Date Written: May 14, 2024

Abstract

In 2020, the SEC issued amendments to Regulation S-K requiring filers to provide discussions related to their human capital (HC) management practices. We use textual analysis to extract qualitative characteristics of these disclosures for all available 10-Ks during the first two years of the mandate. We document that, instead of evolving towards “best in class” disclosure practices under the principles-based regulation, firms exhibit a regression towards the mean on each qualitative characteristic that we examine: length, number of topics, specificity, numerosity, readability, and similarity. In other words, although firms with poorer-quality disclosures improve over time, those with better-quality disclosures learn that they have overshot the average standard and reduce the quality of their disclosures. Further tests reveal that, notwithstanding their limitations, certain HC disclosure characteristics are significantly associated with employee ratings from Glassdoor as well as with firm value.

Keywords: Human capital, ESG, sustainability, linguistic analysis, disclosure, SEC regulation

JEL Classification: G38, J80, M41, M48

Suggested Citation

Demers, Elizabeth and Wang, Victor Xiaoqi and Wu, Kean, Corporate Human Capital Disclosures: Evidence from the First Two Years of the SEC’s Disclosure Mandate (May 14, 2024). Available at SSRN: https://ssrn.com/abstract=4153845 or http://dx.doi.org/10.2139/ssrn.4153845

Elizabeth Demers (Contact Author)

University of Waterloo ( email )

Waterloo, Ontario N2L 3G1
Canada

Victor Xiaoqi Wang

California State University, Long Beach - Department of Accountancy ( email )

1250 Bellflower Blvd.
Long Beach, CA 90840
United States

Kean Wu

Rochester Institute of Technology (RIT) - Saunders College of Business ( email )

Saunders College of Business
105 Lomb Memorial Drive
Rochester, NY 14623-5608
United States

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