In earlier studies reported mixed results of therelationship between HR disclosure and profitability. For example, Williams(2001) noticed a significantly inverse relationship through investigating 40 UKcompanies. Sonnier et al. (2007) reach to similar findings through examining143 high-tech companies in the US.
However Garcia-Meca et al. (2005) and Li etat (2008) found a significantly positive relationship in spain and UKrespectively. Ahmed (2009), Hossain (1998), Owusu Ansa’ (1998). Inchausti(1997), Raffournier (1995); Wallace and Nascr (1985) and Wallance(1987) used Profitability in disclosure studies asindependent variable. Hossain (1998) identified that profitability is capableof influencing the level of corporate information disclosure. Owusu-Ansah(1998) found that unprofitable companies are also inclined to release more informationto defend their poor performance.Lang and Lundholni (1993) noted that theinfluence of a company’s profitability level on disclosure can he positive,neutral or negative, depending on its performance. But the study of Belkaouiand Kahl (1978) found a negative relationship between profitability and levelof reporting.
H1. Thereis a positive association between company’s profitability and level of disclosurequality. 3.2.2 Employee ExpensesJindal et al. (2012) in their study reveal that humancapital disclosure Score is positively correlated with the employee expenses asa proportion of their total operating expenses. This essentially means that thecompanies in which employee expenses constitute a majority of operatingexpenses are the ones which disclose more on the HC front.
Other study ofWright and Snell (2005) showed that value in knowledge based economy can be created by better training, development and retention of the employees. This enhanced value of firm, with better HR activities,cannot be reported on the balance sheet. It can only be reported to itsinvestors through HC disclosures. Thus, HC disclosures should increase with the increasedamount of spending on employees.
With the emerging knowledge economy the