Training and development investment and financial performance: The bidirectional relationship and the moderating effect of financial slack. (22nd June 2021)

• Record Type: Journal Article
• Authors: Yoo, Sangok; Lee, Suhyung; Kim, Sehoon; Jang, Soebin; Cho, Daeyeon
• Is Part Of: Human resource development quarterly. Volume 33:Number 2(2022)
• Page Start: 115
• Page End: 136
• Publication Date: 2021-06-22
• Subjects: financial performance -- financial slack -- lagged dependent variable model -- training and development investment; Personnel management -- Research -- Methodology -- Periodicals; Personnel management -- Periodicals; Personnel management -- United States -- Periodicals; 658.3005
• DOI: 10.1002/hrdq.21449
• Languages: English
• ISSNs: 1044-8004

Abstract

Abstract: Research has not yet clearly demonstrated the relationship between training and development (TD) investment and financial performance. This study examines the bidirectional, non‐linear, one‐year‐lagged relationship between TD investment and financial performance, and the moderating effect of financial slack on the relationship based on the resource‐based view and the theory of slack resources. We analyze financial data of 174 firms in South Korea over 10 years (2009–2018) using a lagged dependent variable model. Our results demonstrate that TD investment contributes to later financial performance, and financial performance contributes to later TD investment. We find an inverted U‐shaped relationship between TD investment and financial performance in both directions. Financial slack positively moderates the bidirectional relationship, such that the inverted U‐shaped effect of TD investment on financial performance is more pronounced among those with low financial slack. In the effect of financial performance on TD investment, firms with high financial slack show a U‐shaped curve, while firms with low financial slack show an inverted U‐shaped curve. This study provides valuable information for human resource development scholars and practitioners about the relationship between TD investment and financial performance.