The Moderating Effect of Earning Quality on Financial Distress Prediction of Companies Listed in Tehran Stock Exchange

Document Type : Research Paper

Authors

islamic azad university of urmia

Abstract

One of the threats facing the companies is the financial distress and the bankruptcy accordingly. The purpose of this study is to investigate the effect of earning quality as a moderator in companies’ financial distress prediction. The population of study included 41 distressed and 41 non distressed companies listed in Tehran Stock Exchange during 2003 to 2013. The selection criterion to choose distressed companies was the use of five specific criteria for financial distress. Firstly, to verify the separation accuracy of two samples, distress and Non-distress, using the Wilcoxon test, the average of two independent variables were analyzed. In order to investigate the financial distress prediction, three models included Altman, Ohlson and Bharath and Shumway in a binary logistic regression were used. The findings of the study show that the earning quality significantly increases the accuracy of predicting financial distress.  Also Altman model, in comparison to other models, is more accurate in predicting financial distress, so it is considered as a more suitable tool in prediction.

Keywords

References

-      احمدپور، احمد؛ نصیری، مهراب. (1393)، "بررسی رابطه بین مدیریت سود با اختلاف قیمت پیشنهادی خرید و فروش سهام و حجم معاملات در شرکتهای با سطح مالکیت غیرنهادی بالا". راهبرد مدیریت مالی، سال دوم، شماره 6: صص 48-27.
-      رحیمیان، نظام الدین؛ توکل نیا، اسماعیل؛ قربانی، محمود. (1393)، "درماندگی مالی و تأخیر گزارش حسابرسی". دانش حسابداری مالی، شماره 2: صص 77-57.
-      دستگیر، محسن؛ حسین­زاده، علی حسین؛ خدادادی، ولی؛ واعظ، سیدعلی. (1391)، "کیفیت سود در شرکتهای درمانده مالی". پژوهشهای حسابداری مالی، شماره 1: صص 16-1.
-      جمالیان­پور، مظفر؛ ثقفی، علی. (1392)، "اقلام تعهدی غیرمنتظره، انحراف پایداری سود و بحران مالی". دانش حسابداری، شماره 12: صص 33-7.
-      صالحی، مهدی؛ بذرگر، حمید. (1394)، "رابطه بین کیفیت سود و ورشکستگی". راهبرد مدیریت  مالی، سال سوم، شماره 8: صص 108-81.
-      Altman, E.I. (1968). “Financial Ratios, Discriminant Analysis and the Prediction of Corporate Bankruptcy”. The Journal of Finance, 23(4), pp.589- 609
-      Asquith P, R. Gertner and D. Scharfstein (1994), “Anatomy of Financial Distress: An Examination of Junk-bond Issuers.” Quarterly Journal of Economics, 109)3(, pp.1189-1222.
-      Bharath, S.T., J. Sunder, and S. V. Sunder. (2008).” Accounting quality and debt contracting”. The Accounting Review, 83 (1):pp. 1-28.
-      Francis, J., R. LaFond, P. M. Olsson, and K. Schipper. (2005). “The market pricing of accruals quality”. Journal of Accounting and Economics 39: pp.295-327
-      Francis, J., Nanda, D.J., and Olsson, P. (2008). “Voluntary disclosure, earnings quality and cost of capital”. Journal of Accounting Research, 46 (1), pp.53-99.
-      Gaio, C. and C. Raposo (2011). "Earnings quality and firm valuation: international evidence." Accounting & Finance, 51(2): pp.467-499.
-      Garcia Lara ,J.M ,Osma , B.G and F.Penalva. (2009). " Conditional Conservatism and Firm Investment Efficiency " , on line :http//www.ssrn.com.   
-      Gilbert, L. R., K. Menon, and K. B. Schwartz. (1990). “Predicting Bankruptcy for Firms in Financial Distress”. Journal of Business Finance and Accounting. 17)1(: pp.161-171.
-      Ivanov, V. and L. Kilian(2005)."A Practitioner’s Guide to  Lag Order Selection for VAR Impulse Response  Analysis" , Studies in Nonlinear Dynamics & Econometrics, 9(1), pp.1-36.
-      John, K, L. H. D. Lang and J. Netter (1992), “The Voluntary Restructuring of Large Firms in Response to Performance Decline.” Journal of Finance, 47(3), pp.891-917.
-      Lau, A. H. (1987), "A Five-State Financial Distress Prediction Model." Journal of Accounting Research, 25(1), pp.127-138.
-      Martin, S., and Peat, M. (2009). “A Comparison of the information content of accounting and market measures in distress prediction”, INFINITI Conference on International Finance.
-      Merton, R. (1974). “On the Pricing of Corporate Debt: The Risk Structure of Interest Rates”. The Journal of Finance, 29(2), pp.449-470.
-      Ohlson, J.A. (1980), "Financial Ratios and the Probabilistic Prediction of Bankruptcy," Journal of Accounting Research, 18(1), pp.109-131.
-      Opler, T., Titman, S. (1994). "Financial Distress and Corporate Performance". The Journal of Finance, 49 (3), pp.1015-1040.
-      Ruihao, Ke (2012), Predicting financial distress in debt contracting.University of California, Los Angeles.
-      Sun, Jie, Ming-yue Jia, and Hui Li. (2011). "Adaboost ensemble for financial distress prediction: An empirical comparison with data from Chinese listed companies." Expert systems with applications. 38(8): pp.9305-9312.
-      Xie, C. and C. Luo, and X. Yu. (2011), “Financial distress prediction based on SVM and MDA methodes: the case of Chinese listed companies”.Quality and quantity. 45(3), pp.671-686

Files

History

  • Receive Date: 28 October 2015
  • Revise Date: 10 January 2017
  • Accept Date: 08 March 2017

Share

How to cite

Statistics