Training and development investment and financial performance: The bidirectional relationship and the moderating effect of financial slack

Sangok Yoo, Suhyung Lee, Sehoon Kim, Soebin Jang, Daeyeon Cho

Research output: Contribution to journalArticlepeer-review

10 Scopus citations

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.

Original languageEnglish (US)
Pages (from-to)115-136
Number of pages22
JournalHuman Resource Development Quarterly
Volume33
Issue number2
DOIs
StatePublished - Jun 22 2021

Bibliographical note

Publisher Copyright:
© 2021 Wiley Periodicals LLC.

Keywords

  • financial performance
  • financial slack
  • lagged dependent variable model
  • training and development investment

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