May investment in human capital or HR policies of organisations be helpful in predicting default or insolvency?
I am not sure about that. But you can make primary research on that. or you can go through some review literature on this.
Self-appreciation; or, the aspirations of human capital
doi.org/10.1016/S0144-8188(02)00114-X
THE FINANCIAL SECTOR AND ECONOMIC DEVELOPMENT: BANKING ON THE ROLE OF HUMAN CAPITAL.
Not so sure about it. I am thinking about the investment in R & D or the intellectual capacity that goes with it. You can however examine how significant the ratio of that investment in HR to total income in predicting insovency/distress
More than the investment in human capital or HR policies, it is the manner in which the top management responds to the shortcomings, fraudulent acts, operational errors - (both gross and judgmental), at the branch level, zonal and region-wise levels, which would predict default or insolvency. For example, there were so many instances reported in the Press about frauds committed at various branches of ICICI Bank over several years, when Chanda Kochhar was the C & MD. But these were brushed aside as one-off incidents. She was getting coveted awards. She was above blemish. Then one fine day, irregularities at the Board level surfaced and she herself was found involved in some of these.
Immediate response to the fraudulent acts at any level is much needed - this may not require additional investment, as all the institutions have their internal audit systems. But bringing out the fraudulent acts quickly and acting upon them, would bring down the insolvency.
Thank you @Kuldeep Singh. I will refer to your paper for possible help.
Investing in Training Programs or Modules for (i) Fraud Detection; (ii) Forensics; (iii) Consequences or implications of unethical and fraudulent practices (programs on ethical and honest practices will not be effective, whereas what would happen if executives indulge in unethical practices- as observed in contemporary corporate world would be more effective)- this would enhance the skills and builds capacity to predict insolvency or deter fraudulent practices.
The current trend is to use Bots or IoT and data analytics.
Recent studies about corporate frauds are depicted in
https://www2.deloitte.com/content/dam/Deloitte/in/Documents/finance/in-risk-fraud-survey-2018-noexp.pdf
https://www.grantthornton.in/globalassets/1.-member-firms/india/assets/pdfs/financial-and-corporate-frauds.pdf
- Delloitte study in its survey has an interesting question : Who would the future fraudster be? And the survey results report : " Junior and middle management employees were identified as being most likely to commit fraud. The primary motivation to commit fraud was identified as the ability of the fraudster to improve his/her financial position (57%), and the confidence of not being caught in the act (23%). Hearteningly, the majority of respondents (64%) believe that suspicious behaviors in employees can be identified early on and dealt with appropriately to prevent fraud."
Human Resource Management and Risk Management (risk of insolvency) - a combined study is still at nascent stage. HR practices can influence the culture that prevents or reduces the risks. Following literature review paper may provide inputs for the topic
Karen Becker, Michelle Smidt (2016) A risk perspective on human resource management: A review and directions for future research, Human Resource Management Review, Vol 26 Issue 2, pp 149-165
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