Who Should Be Considered for Firms: General Human Capital and Strategic Expenses Management?

• In Event: Management Accounting 3

Abstract

This study examines how CEO general human capital, one of the most critical issues in recent management research, affects crucial managerial decisions for incurring strategic expenditures such as R&D expenses, advertising expenses, and SG&A expenses. Scholars have recently begun exploring the role of human capital in CEO selection in labor market. For example, Finkelstein and Hambrick(1996) and Kaplan, Mark, and Morton (2011) document the important characteristics and abilities of CEOs for firm behavior. Combining a human capital perspective with the firm strategic expenses management literature, the present paper hypothesizes that generalist CEOs with stronger general human capital enhances the management of strategic expenses. The strategic expenses return over the long time, and the sensitivity of strategic expenses is related with general human capital, because general human capital help CEOs to have more bargaining power in the labor market and make them more efficient decision-making with long career horizons. My findings suggest that CEO human capital is essential to understanding firm outcomes, and that general human capital is the most important driver of strategic expenses activities over a nine-year period, consistent with human capital theory. Finally, the study outlines possible avenues that scholars can pursue to further examine the productive role of general human capital in strategic expenses management with firm value.

Author

• Kwangjoo Koo, William Paterson University of New Jersey