An Evaluation of Human Capital Efficiency on Performance of Listed Service Firms in Nigeria

Abstract

This study evaluates the effect of human capital efficiency on financial performance of listed service firms in Nigeria, ranging from 2010 to 2019. The independent variable is human capital efficiency, while the dependent variables are, net profit after tax margin, gross profit margin and profit before tax margin. The researcher employed earnings before interest and tax margin to control the model which is in line with related extant literature. Ex-post facto research design was along with sample size of sixteen (16) out of twenty-five (25) quoted service firms in Nigeria Stock Exchange. The data for the study was sourced from the Nigerian Stock Exchange Fact Books and related companies’ Annual Financial Reports for the periods covered. Specifically, the author conducts pre regression analysis which includes descriptive statistics, correlation matrix, and normality of residua analysis. Basically, the Panel Ordinary Least Square Regression analysis was first conducted, and several diagnostic tests were carried out to check if it violates the basic Gauss Markov Theorem and assumptions. These post regression test include homoscedasticity and multicollinearity tests. A critical examination of all the diagnostic test revealed that the models failed the homoskedasticity assumption of the OLS estimates and thus, the researcher adopted the Robust Standard Error technique to correct for this problem. Findings from the robust standard error estimator reveals that: Human capital efficiency has a negative insignificant effect on net profit after tax margin and positive significant effect on gross profit margin. On profit before interest and tax margin, human capital efficiency has a positive insignificant effect. It was therefore, recommended that service firms will achieve high performance relating to gross profit margin if they continuously train and retrain their staff to acquire cognate and state-of-art skills to deliver services.