Abstract

This dissertation consists of two essays on the newly mandated Human Capital Management (HCM) disclosure introduced by the Securities and Exchange Commission (SEC) in 2020. The SEC adopts a principles-based approach, allowing firms discretion over what to disclose, resulting in significant variation in HCM disclosures. The first essay investigates the role of board Human Resources (HR) governance on HCM disclosure transparency. More companies are renaming their compensation committees as HR committees to reflect a broader responsibility for HCM, and more companies are appointing directors with HR expertise. The results show that board HR governance is positively associated with HCM disclosure transparency, but only when both an HR committee and HR expertise are present. Conversely, when either mechanism exists in isolation, HCM disclosure transparency is lower. These findings suggest that both mechanisms are necessary to promote effective HCM transparency. The results are more pronounced in firms with a Chief Human Resources Officer (CHRO) and firms experiencing employment growth. These findings hold true when using an entropy-balanced sample. The second essay examines the usefulness of HCM disclosure transparency to financial analysts, who play a key role in capital markets. The results show that HCM transparency is associated with higher analyst forecast accuracy but has no significant association with forecast dispersion. This suggests that HCM transparency adds to individual analysts' private information, helping them assess firm value from HCM practices. Furthermore, the second essay identifies which HCM topics are most relevant to analysts. The results reveal that topics related to attraction, retention, development, turnover, compensation and benefits, diversity, equity, inclusion (DEI), and culture are associated with higher forecast accuracy, particularly when the numerical intensity of these topics is higher. This suggests that not all HCM topics are equally informative, with a clear emphasis on quantitative details that provide analysts with the information needed to evaluate firm value effectively.