IMPACT OF HUMAN RESOURCE ACCOUNTING ON THE PERFORMANCE OF SMALL AND MEDIUM ENTERPRISES IN SOUTHWEST NIGERIA

Abstract

This study examined the effect of Human Resource Accounting on the financial performance of Small and Medium Enterprises (SMEs) in Southwest Nigeria. Specifically, it examined the effects of human resource acquisition cost, training cost and staff cost on SME financial performance. The study was anchored on Human Capital Theory and adopted a survey research design. The population comprised 42,067 registered SMEs in Lagos State and 6,131 in Oyo State, giving a combined population of 48,198 SMEs. A purposive sampling technique was used to select 397 SMEs, from which 286 valid questionnaires were retrieved and analysed using multiple regression analysis. The results showed that human resource acquisition cost had a positive and significant effect on SME financial performance (β = 0.965, p < 0.01). Training cost also had a positive and significant effect (β = 0.950, p < 0.01), while staff cost had a positive and significant effect on financial performance (β = 0.945, p < 0.01). The study concludes that investments in employee acquisition, training and staff compensation contribute significantly to the financial performance of SMEs in Southwest Nigeria. It recommends that SME owners and managers strengthen recruitment and selection practices, increase investment in relevant employee training and development, and maintain competitive compensation structures to enhance employee productivity and organisational performance.