Impact of human resource accounting on organizations’ financial performance in the context of SMEs

Abstract

This study aims to investigate the impact of human resource accounting (HRA) on the overall performance of the organization. By presenting the details of HRA the study identifies various dimensions of organizations’ financial aspects viz., human capital efficiency, organization profitability, return on asset, and return on equity. To understand the impact of various measurements, the study collected required data from 268 responses of human resource and finance departments of SME firms and analyzed the data using linear regression and the result of ANOVA and coefficient values illustrated there is a positive significant effect of HRA on human capital efficiency, organization profitability and return on equity. This is evident that the SME firms in Saudi Arabia are aware of the benefits on HRA of the organization and the only concern is it needs rapid implementation initiatives from the management which is possible with wide awareness across the nation. However, there is no significant effect of HRA on return on assets. This study contributes to the SME firms, human resource departments, and managerial decision-makers to understand the HRA concept and its usefulness to a make positive difference in their financial statements.