Modeling for Emploee Quality Measurement With Shannon Entropy Index and It’s Effect on Financial Reporting Quality

A review of the theoretical literature on human capital in the area of ​​financial reporting states that the employee quality has a positive impact on the financial reporting quality and firm value. The purpose of this study is to determine the effective criteria on the quality of company employees from the experts' point of view and to explain a comprehensive and multi-criteria model for measuring the quality of Iranian corporate employees and to evaluate the impact of the employee quality on the financial reporting quality. For this purpose, firstly, the employee quality criteria were identified according to the Iranian information environment and experts' opinions regarding the weight and importance of each of these criteria were collected through a questionnaire and explained using the Shannon entropy technique of comprehensive employee quality model. Then, using the proposed model, the employee quality index was calculated for a sample of 70 the firms listed on the Tehran Stock Exchange during the period 2012-2017 and the impact of employee quality on financial reporting quality was tested by estimating the regression model. The results of the research show that education level, experience, per capita training and per capita wages are the most important criteria for assessing the quality of staff from the experts' point of view. Also, the results of the analysis of the research hypothesis showed that improving the employee quality index increases the financial reporting quality.