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Archives of Business Research – Vol. 13, No. 03
Publication Date: March 25, 2025
DOI:10.14738/abr.1303.18404.
Odewusi, O. O., Adegbie, F. F., & Nwaobia, A. N. (2025). The Controlling Role of Corporate Governance in Enhancing Firm Value
through Human Resource Accounting in the Manufacturing Sector: Evidence from Nigeria. Archives of Business Research, 13(03).
30-43.
Services for Science and Education – United Kingdom
The Controlling Role of Corporate Governance in Enhancing Firm
Value through Human Resource Accounting in the Manufacturing
Sector: Evidence from Nigeria
Odewusi, Oyetola O.
Babcock University, Ilishan-remo, Ogun State, Nigeria
Adegbie, Folajimi Festus
Babcock University, Ilishan-remo, Ogun State, Nigeria
Nwaobia, Appolos N.
Babcock University, Ilishan-remo, Ogun State, Nigeria
ABSTRACT
Firm value is a critical determinant of shareholder wealth maximization and
investor confidence. However, many manufacturing firms in Nigeria have not fully
integrated human resource accounting (HRA) and corporate governance into their
operational strategies, leading to suboptimal firm value. This study investigated the
controlling role of corporate governance in enhancing firm value through human
resource accounting in Nigeria’s manufacturing sector. The study employed an ex
post facto research design and utilizes secondary data from 28 manufacturing firms
listed on the Nigerian Exchange Group (NGX) between 2009 and 2023. Multiple
regression analysis is used to evaluate the impact of HRA on firm value and the
moderating effect of corporate governance. Human resource accounting has
significant effect on FV of quoted firms in Nigeria (Adj.R2 = 0.237, F (14, 371) =
257.99, p <0.05), Corporate governance has significant controlling effect on FV of
quoted firms in Nigeria (Adj R2 = 0.255, F (14, 369) = 329.38, p <0.05). The study
concluded that Human resource accounting, corporate governance enhanced Firm
Value of quoted firms in Nigeria. The study recommended that policymakers and
regulators enforce global best practices in corporate governance and human
resource management to enhance firm value in Nigeria’s manufacturing sector.
Keywords: Corporate governance, Firm value, Human resource accounting,
Manufacturing firms, Nigeria
INTRODUCTION
Firm value is an essential metric for evaluating a company's financial health and attractiveness
to investors. A firm with high value signals strong corporate performance, effective
management, and robust financial stability. In the manufacturing sector, where capital and
human resources play a critical role in driving productivity, the integration of human resource
accounting (HRA) and corporate governance is essential for maximizing firm value. It may also
make it more difficult for investors to determine the true economic value of the company when
making decisions, which can further result in adverse selection issues (Tulcanaza-Prieto & Lee,
2022).
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Odewusi, O. O., Adegbie, F. F., & Nwaobia, A. N. (2025). The Controlling Role of Corporate Governance in Enhancing Firm Value through Human
Resource Accounting in the Manufacturing Sector: Evidence from Nigeria. Archives of Business Research, 13(03). 30-43.
URL: http://doi.org/10.14738/abr.1303.18404
A company's value is a reflection of its shareholders' wealth. The earnings received by the
shareholders increase with the Firm value (Brigham and Houston, 2021). This is what draws
money into a business from investors. The management's efforts are what generate the Firm
value, not the firm's inherent worth. Firm value is a reflection of how investors feel about the
company. The most common indicator is the difference between the market value and book
value of the company's shares; the higher an investor's assessment of the company's quality,
the higher the market value of the company will be, and vice versa (Kasibi et al., 2023). Reforms
and policies have been implemented to ensure that businesses can achieve the goals of
maximizing profit and the wealth of their owners. Among these are corporate governance
reforms include boosting CEO compensation transparency and regulation (Hassan et al., 2022),
strengthening board independence and diversity (Khan et al., 2022), and promoting audit
quality and auditor independence (Ahmed et al., 2020).
Tax policies that support increasing transparency in tax reporting and decreasing tax evasion
(Klein et al., 2020), implementing progressive taxation to reduce income inequality (Wang et
al., 2020), and introducing tax incentives for businesses that prioritize social responsibility
(Hassan et al., 2022). Another policy and reform is regulatory oversight, which includes
enforcing fines for non-compliance with regulations (Wang et al., 2020), improving
transparency requirements for firms (Ahmed et al., 2020), and bolstering regulatory
organizations to monitor firm activity (Khan et al., 2022). Stakeholder protection is another
important government policy that has boosted investor confidence. It covers topics like putting
policies in place to protect minority shareholders (Hassan et al., 2022), improving employee
rights and protections (Klein et al., 2020), and encouraging businesses to put social
responsibility and sustainability first (Wang et al., 2020). These reforms to a very high extent
have been complied with and that’s why we can see some level of firm value being improved
upon and further compliance with these reforms will lead to greater increase in firm value.
Consequent to this has brought motivation for the study.
The value of the company is a common metric used to assess corporate success. As a result, it
becomes a useful tool for businesses looking to establish their reputation and draw in financing.
As a result, managers and regulators' concerns about the firm's value have significantly
increased (Nguyen, 2023). The significance of firm value has increased for businesses, both
financial and non-financial. When assessing business worth, financial firms exercise a little
more caution (Esan et al., 2022). The quality of human resources is vital to corporate operations
in today's competitive business climate; hence, it is recognized as an asset, a source of value,
and a vital source of competitive advantage. The term "human resource" refers to the collective
of individuals who work for an organization or a firm. This phenomenon may be accounted for
by the business community's apparent increasing recognition of the importance that major
stakeholders place on corporate activity that is both socially and ecologically responsible
(Alekhya and Lakshmi, 2020). An organization's ability to supply physical labor as well as
technical and professional skills—both necessary for the effective and efficient planning and
implementation of development policies, programs, projects, and day-to-day operations -
makes human resources the cornerstone of any business. Human resource accounting has an
impact on a number of organizational performance metrics, including stakeholder
expectations, employee, team, and institution performance (Van De Klundert et al., 2018).
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Archives of Business Research (ABR) Vol. 13, Issue 03, March-2025
Services for Science and Education – United Kingdom
Despite the significance of HRA in improving organizational efficiency, many manufacturing
firms in Nigeria have failed to incorporate it effectively. This has led to declining firm value,
weak investor confidence, and poor financial health. Additionally, weak corporate governance
structures have exacerbated these challenges, leading to issues such as poor executive
oversight, inadequate risk management, and inefficient resource allocation. This study,
therefore, examines the extent to which corporate governance moderates the impact of HRA on
firm value in Nigeria’s manufacturing sector.
Firms today face the problem of firm value which research has classified as poor, dwindling,
and volatile and structural which research has attributed to poor quality of financial
statements, ownership structure, poor business model and system and poor market
penetration. According to Ozovehe (2024), firms today are faced with a lot of challenges that
have negatively affected their performance and require urgent attention before it leads to a
total collapse of the sector as it is one of the sectors that significantly contributes to the growth
of the economy. Firm value issues have caused investors and stakeholders great concern.
According to Ozovehe (2024), firms today are faced with a lot of challenges that have negatively
affected their performance and require urgent attention before it leads to a total collapse of the
sector as it is one of the sectors that significantly contributes to the growth of the economy.
Firm value issues have caused investors and stakeholders great concern.
Corporate growth is another factor that might impact a company's value since investors
demand a higher rate of return on investment from companies with stronger profit margins.
Their shares will therefore draw in investors with strong growth. The sustainability of
operations and the ability of manufacturing enterprises to continue operating are threatened
by a decline in their firm value. In the end, the manufacturing sector - which is viewed as a
center and a driver of economic growth—affects the overall performance of the economy,
which worries stakeholders and investors and necessitates immediate attention.
Dada and Ghazali (2016) discovered that, as measured by Tobin's Q, company performance is
significantly impacted by company growth. Although Tobin's Q is an often used indicator of
business value, research has shown that it has a number of issues. This metric evaluates a
company's market value in relation to its replacement cost. For some businesses, the market
value is low and cannot afford the expense of replacement. Among the issues businesses
encounter is the challenge of estimating replacement costs. It can be difficult to estimate the
replacement cost of a company's assets, particularly for intangible assets like human capital or
brand reputation (Khan et al., 2022). This is because intangible assets may not be reflected in
the estimate. Tobin's Q concentrates on material assets while disregarding intangible assets,
which can be impacted by market and industry situations and may add a substantial amount to
the firm's worth (Ahmed et al., 2020). It is challenging to compare businesses across different
industries or time periods because of the influence of market and industry conditions on
Tobin's Q (Hassan et al., 2022).
Market capitalization is a straightforward and popular way to gauge a company's worth.
Additionally, unimpressive is the total market value of the outstanding shares of the businesses.
The underlying value of a corporation may not be reflected in its market capitalization. Because