Ethan Rouen, Assistant Professor of Business Administration, Harvard Business School
We explore the recent landscape of quantitative human capital (HC) disclosures for publicly listed U.S. firms. Using a hand-collected sample of disclosures for 2,393 firms, we first provide detailed descriptive evidence about firms’ HC disclosure in their ESG reports and 10-K filings. While only 22% of our sample publishes an ESG report, these reports contain much richer HC disclosures than do 10-Ks. Even so, an amendment to Regulation S-K that required firms to disclose more HC information had an economically meaningful effect on disclosure, although many firms seemed to shift information previously disclosed elsewhere. The increase in disclosure in 10-Ks post regulation is driven by metrics on diversity, equity, and inclusion, and employee turnover. Importantly, the amendment is associated with increased value relevance of the disclosures in the post-regulation period but only for firms disclosing financially material metrics in industries where human capital is said to be relevant to investors.
Ethan Rouen is an assistant professor of business administration in the Accounting and Management Unit, where he teaches the elective course Reimagining Capitalism, and the faculty co-chair of the Impact-Weighted Accounts Project at Harvard Business School.