Predicting employee turnover using financial indicators in the pharmaceutical industry

Abstract

Purpose This study aimed at investigating the impact of some financial indicators (salary competitiveness, employee productivity, company performance and company size), disclosed in the annual financial reports, on employee turnover in Jordanian pharmaceutical companies listed on the Amman Stock Exchange (ASE). Design/methodology/approach A longitudinal design with cross-sectional time-series (panel) data from annual financial reports of six Jordanian pharmaceutical companies, listed on the ASE for the period 2009–2018, was used to measure employees’ turnover and its precedents quantitively. The panel data of 160 observations (six companies with ten-time periods) were analyzed using STATA 15.0 to achieve study objectives. Findings Contrary to what is expected, the results showed that salary competitiveness does not affect employee turnover, and employee productivity positively affects employee turnover. In contrast, the results of this study supported the widespread belief that company performance and size negatively affect employee turnover. Research limitations/implications This study does not address voluntary and mandatory turnover because it is very difficult to distinguish the two types based on financial reports. Also, other important variables (medical expenses, training expenses, etc.), which can affect employee turnover are not disclosed in the financial reports of all pharmaceutical companies due to the lack of uniform financial reporting standards. Practical implications Pharmaceutical companies should not focus on salaries to attract and retain employees but rather provide them with a distinct set of other benefits including salaries. Also, it should try to reduce the workload of employees by increasing their number to the extent that it does not constitute an additional burden on other employees. Originality/value This is the first attempt, according to a literature review, to measure employee turnover and its antecedents based on financial indicators disclosed in the pharmaceutical companies’ annual financial reports.