Title: Digital Human Capital and Management Decision-Making: Evidence from Management Earnings Forecasts

Authors: Ran An (Xiamen University), Feng Tian (The Hong Kong Polytechnic University), Sean Xin Xu (Tsinghua University)

Abstract: This study examines the relation between digital human capital—defined as firms’ stock of knowledge, skills, and abilities of individuals regarding digital technologies—and management forecast accuracy. Using a sample of 3,265 firm-years over 2008–2020, we find a positive and economically significant relation between the intensity of digital human capital and management forecast accuracy. This relation remains robust to our instrumental variable analysis, the inclusion of firm fixed effects, and joint industry and year fixed effects estimation, and other sensitivity checks. We further find that digital human capital enhances management forecast accuracy by mitigating optimistic biases. Digital human capital has a more pronounced impact on management forecast accuracy for firms with better-integrated information systems, those with a high internal control risk, and those operating in highly volatile environments. Furthermore, we find that digital human capital positively affects operational efficiency by improving forecasting ability. These results demonstrate that digital human capital plays an important role in improving decision-making quality.