An analysis of the effect of temporary/permanent contracts on firm efficiency performance: evidence from South Korea

Purpose (limit 100 words) Because no international accounting policy exists to mandate human capital (HC) information must be reported on financial reports, the association between workforce HC and firm performance/efficiency is not well-established. South Korea is a rare example with high HC reporting quality, as well as relatively high national productivity. On the other hand, in some developed countries (such as the UK), HC reporting quality and productivity is low. Moreover, there is an increasing propensity to offer employees non-standard contracts. Thus, because of a divergence in HC reporting quality internationally, the South Korean sample can provide valuable insights to countries with weak HC reporting quality about the association between contract quality and firm performance/efficiency. Design/methodology/approach (limit 100 words) Using a sample of Korean listed firms (2010-2015), pooled OLS regression analysis is conducted to show whether firms that offer employees higher levels of permanent, relative to temporary contacts demonstrate higher firm performance/efficiency. Findings (limit 100 words) Firms that provide employees with increasing permanent (temporary) contracts experience higher (lower) performance/efficiency. Research limitations/implications (limit 100 words) This research is limited due to sample seletion. However, the sample represents the population of all firms that report contract type information in South Korea, a market with highly robust human capital information reporting. Practical implications (limit 100 words) Because of data unavailability, a positive association firm-level performance/efficiency and permanent employment can only be made in a handful of countries. The study has policy implications and extends the non-financial reporting literature by addressing HC reporting limitations that exist in the mainstream accounting framework. Based on relative operational efficiency/performance, the study offers practical insights to management about the importance of staff retainment. Moreover, we also offer an anthropocentric perspective by inferring how low HC reporting quality can have a negative impact on society in Industry 4.0. Originality/value (limit 100 words) Because of data unavailability, a positive association firm-level performance/efficiency and permanent employment can only be made in a handful of countries. The study has policy implications and extends the non-financial reporting literature by addressing HC reporting limitations that exist in the mainstream accounting framework. Based on relative operational efficiency/performance, the study offers practical insights to management about the importance of staff retainment. Moreover, we also offer an anthropocentric perspective by inferring how low HC reporting quality can have a negative impact on society in Industry 4.0.