Modeling for CEO Human Capital Measurement by Shannon Entropy Index and It’s Effect on Earnings Forecasts Quality

• Published in: مطالعات تجربی حسابداری مالی Vol. 18; no. 69; pp. 55 - 84
• Main Authors: Ghodratollah Nikzad Chaleshtori, Mehdi Arabsalehi, Daryush Foroghi
• Format: Journal Article
• Language: Persian
• Published: Allameh Tabataba'i University Press 01.03.2021
• Subjects: bias of earning forecast; ceo human capital; error of earning forecast; horizon of earning forecast; shannon entropy
• ISSN: 2821-0166; 2538-2519
• DOI: 10.22054/qjma.2021.56501.2202

A review of the accounting theoretical literature confirms the role of CEO human capital as a valuable intangible asset for the company. The purpose of this study is to determine the effective criteria on the CEO human capital and to explain a comprehensive and multi-criteria model for measuring the CEO human capital and evaluate the impact of the CEO human capital on the Earnings Forecasts Quality. For this purpose, firstly, the CEO human capital criteria were identified and experts' opinions regarding the weight of each of these criteria collected through a questionnaire and explained using the Shannon entropy technique of comprehensive CEO human capital model. Then, using the proposed model, the CEO human capital index was calculated for a sample of 70 the firms listed on the TSE during the period 2012-2017 and the impact of CEO human capital on Earnings Forecasts Quality was tested by estimating the regression model. The results show that Education level, work experience and industry-related field are important criteria of CEO human capital from the experts' point of view. Also, the results of the analysis of the research hypothesis showed that the improvement of the CEO human capital index has a positive effect on the horizon of earning forecast and reduces the bias of earning forecast. While the impact of the CEO human capital on the error of earning forecast and the range of earning forecast was not confirmed .