Human Capital Gains

While executives have long touted the central importance of their employees, investors have complained of a lack of transparency in disclosures related to human capital. Responding to these criticisms, in 2020 the SEC issued amendments to Regulation S-K, requiring companies to provide more thoroughgoing and detailed descriptions of human capital resources. However, registrants were allowed significant discretion over the nature and amount of their disclosures. What has been the result?

Kean Wu, associate professor of accounting, seeks to answer that question in a co-authored article, “Corporate human capital disclosures: Evidence from the first two years of the SEC’s disclosure mandate,” published in Accounting Horizons (February 2026).

Wu and his collaborators studied available human capital disclosures for the first two years of the regulation—November 2020 to November 2022—with a final sample of 4,897 firm-year observations. They then used textual analysis to extract linguistics-based qualitative disclosure characteristics and determine how firms responded to the new disclosure mandate in terms of length, topics, specificity, numerical intensity, readability, and similarity.

They found that disclosure is influenced by firms’ reporting styles, institutional ownership, product market competition, and human capital performance. However, over the two-year period, firms with initially better-quality disclosures worsened and those with poorer disclosures modestly improved, resulting in “convergence toward mediocrity.” Nonetheless, the disclosures, while imperfect, provide valuable information to market participants.

The study’s findings suggest that regulators “should consider establishing baseline quality thresholds while preserving flexibility for firm-specific contexts.”

View the paper published by Accounting Horizons in February 2026: “Corporate human capital disclosures: Evidence from the first two tears of the SEC’s disclosure mandate.”