HUMAN CAPITAL METRICS, FINANCIAL SUSTAINABILITY AND SHAREHOLDER VALUE: A STRUCTURAL EQUATION MODELING APPROACH WITH SECTORAL MODERATION

DOI: https://doi.org/10.5281/zenodo.20618741

Authors:

Dr. Madhumathy K, Dr C V Purushotham

Keywords:

Human Capital Metrics, Financial Sustainability, Shareholder Value, Confirmatory Factor Analysis (CFA), Structural Equation Modeling (SEM), AMOS, Sectoral Moderation, Employee Engagement, Human Capital Analytics.

Abstract:

Human capital has emerged as a critical strategic asset that significantly influences organizational performance, financial sustainability, and shareholder value. This study examines the impact of human capital metrics on long-term financial sustainability and shareholder value by incorporating a Structural Equation Modeling (SEM) approach using AMOS. The research focuses on key human capital dimensions, including employee engagement, employee retention, workforce productivity, leadership effectiveness, training and development, and employee satisfaction, and investigates their influence on organizational financial outcomes and value creation for shareholders. The study employs Confirmatory Factor Analysis (CFA) to validate the measurement model and assess the reliability and validity of the constructs. Subsequently, SEM is utilized to examine the direct and indirect relationships between human capital metrics, financial sustainability, and shareholder value. In addition, sector type is introduced as a moderating variable to evaluate how the relationship between human capital metrics and shareholder value differs across industries such as Information Technology, Healthcare, Banking, Manufacturing, and Education. The findings indicate that human capital metrics have a significant positive effect on financial sustainability, which in turn enhances shareholder value. The CFA results confirm the adequacy of the measurement model, while the SEM results reveal strong structural relationships among the study variables. Furthermore, the moderation analysis demonstrates that the strength of the relationship between human capital metrics and shareholder value varies across sectors, with knowledge-intensive industries exhibiting stronger effects than traditional sectors. The study concludes that effective human capital management serves not only as an operational performance indicator but also as a strategic driver of sustainable financial performance and shareholder wealth creation. The research highlights the importance of integrating human capital analytics into organizational strategy and recommends that firms adopt sector-specific human capital measurement frameworks to strengthen competitiveness, improve financial sustainability, and maximize shareholder value in a dynamic business environment.

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