Financial Valuation of Human Capital According to the Human Capital Asset Pricing Model

Abstract

Financial valuation is one of the most important analytical tools in the fields of economics and financial management. It is used to determine the financial value of assets, projects, and various investments. Financial valuation plays a key role in improving the efficiency of resource allocation, reducing risk, and promoting sustainable growth across different sectors.  In this research, the valuation of human capital is considered one of the modern applications of financial valuation, where the financial value of individuals is analyzed. This has sparked increasing academic debate regarding the feasibility, importance, and methodology of evaluating human resources as a fundamental organizational asset.  This intellectual debate has encouraged many researchers to explore this topic further, aiming to assess existing models and propose new ones for valuing intangible assets—specifically, the financial valuation of human capital.  Accordingly, the research problem centers around the ongoing debate about the possibility of evaluating human capital through quantitative models and expressing it in financial terms, which directly influences organizational decision-making, returns, and risk levels.  The main objective of this study is to provide a financial value that reflects human capital as an intangible asset. To achieve this, the Human Capital Asset Pricing Model was employed and applied to a sample representing human capital—specifically, surgical physicians.  The research reached several conclusions and recommendations, most notably that the model offers a financial valuation method for estimating the value of human capital. A key recommendation of the study is that relying on a single model may not be sufficient for the financial valuation of physicians, and that integrating multiple models could lead to a more accurate estimation.