Document Type : Original Article
Authors
1 Ph.D. in Accounting and Professor, Allameh Tabataba’i University
2 Ph.D. in Industrial Engineering and Associate Professor, Allameh Tabataba’i University
3 Ph.D. in Finance, Allameh Tabataba’i University
Abstract
This study aims to present a model for predicting corporate default among Tehran Stock Exchange’s selected industries. To do this, corporate default drivers were identified and selected by referring to previous research findings and using experts’ opinions. These drivers were divided into five categories: accounting ratios, market variables, macroeconomic indicators, nonfinancial factors, and earnings quality measures. Structural equation modeling (SEM) technique was used to derive the prediction model. In this technique, corporate default drivers were used as latent independent variables, and their constituent factors were considered as observable indicators of the above variables. In addition, corporate default, as the latent dependent variable, was calculated by a measure based on the Black-Scholes-Merton (BSM) option pricing model. After implementing structural equation modeling (SEM) technique by use of Smart PLS software, a prediction model that contains influential drivers of corporate default was derived and presented for each of the selected industries.
Keywords
Abinzano, I., Muga, L. & Santamaria, R. (2014). Is default risk the hidden factor in momentum
returns? Some empirical results. Accounting & Finance, 54(3): 671-696.
Ahmadpour, A., Shahsavari, M. & Amoozad Khalili, A. (2016). Investigation of important
factors on risk of financial bankruptcy. Empirical Studies in Financial Accounting
Quarterly, 13(51): 9-34. [In Persian]
Aleksanyan, L. & Huiban, JP. (2016). Economic and financial determinants of firm
bankruptcy: Evidence from the French food industry. Review of Agricultural, Food and
Environmental Studies, 97(2): 89-108.
Amendola, A., Restaino, M. & Sensini, L . (2015). An analysis of the determinants of financial
distress in Italy: A competing risks approach. International Review of Economics &
Finance, 37: 33-41.
Arasti, Z. (2011). An empirical study on the causes of business failure in Iranian context.
African Journal of Business Management, 5(17): 7488-7498.
Asquith, P., Gertner, R. & Sharfstein, D. (1994). Anatomy of financial distress: An explanation
of junk bond issuers. The Quarterly Journal of Economics, 109(3): 625-658.
Atsu, F. & Costantini, M. (2015). Modelling corporate failure dependence of UK public listed
firms. Working Paper, Brunel University.
Banerjee, S., Dasgupta, S. & Kim, Y. (2008). Buyer–supplier relationships and the stakeholder
theory of capital structure. Journal of Finance, 63(5): 2507–2552.
Bellovary, J. L., Giacomino, D. L. & Akers, M. D. (2005). Earnings quality: It’s time to
measure and report. The CPA Journal, 75: 32-37.
Berryman, J. (1983). Small business failure and bankruptcy: A survey of the literature.
European Small Business Journal, 1(4): 47-59.
Bhattacharjee, A., Higson, C., Holly, S. & Kattuman, P. (2009). Macroeconomic instability and
business exit: Determinants of failures and acquisitions of UK firms. Economica, 76(301):
108-131.
Bottazzi, G., Grazzi, M., Secchi, A. & Tamagni, F. (2011). Financial and economic
determinants of firm default. Journal of Evolutionary Economics, 21(3): 373-406.
Brogaard, J., Li, D. & Xia, Y. (2017). Stock liquidity and default risk. Journal of Financial
Economics, 124(3): 486-502.
Byström, H. (2006). Merton unraveled: a flexible way of modeling default risk. Journal of
Alternative Investments, 8(4): 39-47.
Byström, H., Worasinchai, L. & Chongsithipol, S. (2005). Default risk, systematic risk and Thi
firms before, during and after the Asian crisis. Research in international business and
finance, 19(1): 95-110.
Camacho-Miñano, M. M. & Moreno, A. (2016). Can we sense bankruptcy using the content of
management reports? Working Paper, Complutense University of Madrid.
Charalambakis, E. C., Espenlaub, S. K. & Garrett, I. (2009). Assessing the probability of
financial distress of UK firms. Working Paper, University of Manchester.
Charitou, A., Lambertides, N. & Trigeorgis, L. (2011). Distress risk, growth and earnings
quality. ABACUS, 47(2): 158-181.
Chen, L. H. & Jiang, G. J. (2001). The determinants of Dutch capital structure choice. Working
Paper, University of Groningen.
Christidis, A. & Gregory, A. (2010). Some new models for financial distress prediction in the
UK. Available at: https://ssrn.com/abstract=1687166.
Cornaggia, K. J., Krishnan, G. V. & Wang, C. (2017). Managerial ability and credit ratings.
Contemporary Accounting Research, 34(4): 2094-2122.
54 Iranian Journal of Finance
Crosbie, P. & Bohn, J. (2003). Modeling default risk. Moody's KMV.
Davari, A. & Rezazadeh, A. (2016). Structural Equation Modeling with PLS (Third Ed.).
Tehran: Publication of Iranian Student Booking Agency (Jahad-e Daneshgahi). [In Persian]
Delkhosh, M. & Malek, Z. (2016). The role of earnings quality in predicting bankruptcy of
firms listed on Tehran stock exchange. Management and Accounting Researches, 24: 105-
119. [In Persian]
Denis, D. J. & Denis, D. K. (1995). Causes of financial distress following leveraged
recapitalizations. Journal of Financial Economics, 37(2): 129-157.
di Donato, F. & Nieddu, L. (2016). A new proposal to predict corporate bankruptcy in Italy
during the 2008 economic crisis. In: Huynh, VN., Kreinovich, V. & Sriboonchitta, S.
(editors). Causal Inference in Econometrics. Studies in Computational Intelligence. Cham:
Springer, 2016, 622: 213-223.
Ebrahimi, S. K., Bahraminasab, A. & Mamashli, R. (2017). The effect of financial crisis on
earnings quality. Journal of the Accounting and Auditing Review, 23(4): 415-434. [In
Persian]
Edwards, J. R. & Bagozzi, R. P. (2000). On the nature and direction of relationships between
constructs and measures. Psychological Methods, 5(2):155-174.
Eriksson, P. E. & Pesämaa, O. (2007). Modelling procurement effects on cooperation.
Construction Management and Economics, 25(8): 893-901.
Evans, M. H. (2015). Turnarounds for distressed companies. Retrieved June 21, 2017, from
http://www.exinfm.com/board/turnarounds_distressed_company.htm.
Fadaeinejad, M. E., Shahriary, S. & Salim, F. (2015). An analysis of the relationship between
financial distress risk and equity returns. Journal of the Accounting and Auditing Review,
22(2): 243-262. [In Persian]
Fawzi, N. S., Kamaluddin, A. & Sanusi, Z. M. (2015). Monitoring distressed companies
through cash flow analysis. Procedia Economics and Finance, 28: 36-144.
Feizmohammadi, R. (2014). Financial crisis and bankruptcy prediction of Tehran stock
exchange listed firms using accounting, market and macroeconomic variables. Master
Thesis, Tarbiat Modares University. [in Persian]
Fernandez, G. (2012). A comprehensive study of bankruptcy prediction: accounting ratios,
market variables, and microstructure. Ph.D. Thesis, Florida International University.
Finkel, S. E. (2007). Linear panel analysis. In: Menard, S. (editor). Handbook of Longitudinal
Research: Design, Measurement, and Analysis (First Ed.). Waltham, MA: Academic Press,
2007: 475-504.
Fischinger, S. (2017). Earnings quality and European companies' access to credit. Master
Thesis, Ghent University.
Francis, J., LaFond, R., Olsson, P. & Schipper, K. (2004). Costs of equity and earnings
attributes. The Accounting Review, 79(4): 967-1010.
García Lara, J., García Osma, B. & Neophytou, E. (2009). Earnings quality in ex-post failed
firm. Accounting and Business Research, 39(2), 119-138.
Gaskill, L. R., Van Auken, H. E. & Manning, R. A. (1993). A factor analytic study of the
perceived causes of small business failure. Journal of Small Business Management, 31(4):
18-31.
Gilbert, L. R., Menon, K. & Schwartz, K. B. (1990). Predicting bankruptcy for firms in
financial distress. Journal of Business Finance & Accounting, 17(1): 161-171.
Gilson, S. C. (1989). Management turnover and financial distress. Journal of Financial
Economics, 25: 241-262.
Corporate Default Prediction among Tehran Stock Exchange’s Selected Industries 55
Giordani, P., Jacobson, T., von Schedvin, E. & Villani, M. (2014). Taking the twists into
account: Predicting firm bankruptcy risk with splines of financial ratios. Journal of
Financial and Quantitative Analysis, 49(4): 1071-1099.
Gitman, L. J. (1998). Principle of managerial finance. Working Paper, Harper Collins College.
González-Aguado, C. & Moral-Benito, E. (2013). Determinants of corporate default: A BMA
approach. Applied Economics Letters, 20(6): 511-514.
Gupta, V. (2017). A survival approach to prediction of default drivers for Indian listed
companies. Theoretical Economics Letters, 7: 116-138.
Hajeb, H. R., Ghayouri Moghadam, A. & Ghaffari, M. J. (2014). Examining the effect of
managerial ability on capital structure in the pharmaceutical products and material industry.
Health Accounting, 3(3): 1-17. [In Persian]
Hamilton, B. (2014). The 9 biggest financial warning signs. Retrieved June 21, 2017, from
https://www.entrepreneur.com/article/239730.
Hazak, A. & Männasoo, K. (2007). Indicators of corporate default - An EU based empirical
study. Working Paper, Bank of Estonia.
Hill, N., Perry, S. & Andes, S. (2011). Evaluating firms in financial distress: An event history
analysis. Journal of Applied Business, 12(3): 60-71.
Hillegeist, S. A., Keating, E. K., Cram, D. P. & Lundstedt, K. G. (2004). Assessing the
probability of bankruptcy. Review of Accounting Studies, 9: 5-22.
Howe, J. S. & Houston, R. (2016). Earnings management, earnings surprises, and distressed
firms. Accounting and Finance Research, 5(1): 64-87.
Hozhabri, F. (2016). Examining the relationship between corporate life cycle and restructuring:
Evidence from financially distressed firms listed on Tehran stock exchange. Master Thesis,
Yazd University. [In Persian]
Jantadej, P. (2006). Using the combinations of cash flow components to predict financial
distress. Ph.D. Thesis, University of Nebraska Lincoln.
Jorion, P. (2009). Risk management lessons from the credit crisis. European Financial
Management, 15(5): 923-933.
Kale, J. R. & Shahrur, H. (2007). Corporate capital structure and the characteristics of supplier
and customer markets. Journal of Financial Economics, 83: 321-365.
Karami, A. (2017). Examining the effect of managerial ability on financial distress with an
emphasis on financial felexibility as a mediator variable in firms listed on Tehran stock
exchange. Master Thesis, Urmia University. [In Persian]
Ke, R. (2012). Predicting financial distress: The role of earnings quality. Ph.D. Thesis,
University of California.
Kim, Y. & Sohn, S. Y. (2008). Random effects model for credit rating transitions. European
Journal of Operational Research, 184(2): 561-573.
Koopman, S. J., KrÄaussl, R., Lucas, A. & Monteiro, A. B. (2009). Credit cycles and
macrofundamentals. Journal of Empirical Finance, 16: 42-54.
Kordestani, GH. & Tatli, R. (2014). Earnings quality and firms' financial position. Journal of
Accounting and Auditing Studies, 3(11): 4-19. [In Persian]
Korol, T. (2013). Early warning models against bankruptcy risk for Central European and
Latin American enterprises. Economic Modelling, 31: 22-30.
Lau, A. HL. (1987). A five-state financial distress prediction model. Journal of Accounting
Research, 25(1): 127-138.
Leung, M., Chan, Y., Chong, A. & Sham, J. (2008). Developing structural integrated stressorstress models for clients’ and contractors’ cost engineers. Journal of Construction
Engineering and Management, 134(8): 635-643.
56 Iranian Journal of Finance
Li, D. & Xia, Y. (2015). The effect of stock liquidity on default risk. Working Paper,
University of Hong Kong.
Li, F., Abeysekera, I. & Ma, S. (2013). Earnings quality and stress levels of Chinese listed
companies. Academy of Taiwan Business Management Review, 9(1): 109-116.
Li, F., Abeysekera, I. & Ma, S. (2014). The effect of financial status on earnings quality of
Chinese listed firms. Journal of Asia-Pacific Business, 15(1): 4-26.
Lussier, R. N. & Halabi, C. E. (2010). A three-country comparison of the business success
versus failure prediction model. Journal of Small Business Management, 48(3): 360-377.
Mardani, M., Fallah, R. & Golestani, R. (2016). A review of the relationship between the
structure of corporate governance and financial distress (financial crisis) in companies
listed on Tehran stock exchange. Account and Financial Management Journal, 1(4): 208-
226.
Mashayekhi, B. & Ganji, H. (2014). The effect of earnings quality on predicting bankruptcy by
using artificial neural networks. The Financial Accounting and Auditing Researches, 6(22):
147-173. [In Persian]
Medhat, M. (2015), Measuring and pricing the risk of corporate failures. Ph.D. Thesis,
Copenhagen Business School.
Mehrani, S., Kamyabi. Y. & Ghayour, F. (2017). Reviewing the effectiveness of earnings
quality indices on the power of financial distress prediction models. Journal of the
Accounting and Auditing Review, 24(1): 103-126. [In Persian]
Mertens, R. L., Poddig, T. & Fieberg, C. (2016). Forecasting corporate defaults in the German
stock market. Working Paper, Available at: http://ssrn.com/abstract=2833454.
Mishra, P. S. (2013). Relationship between macroeconomic variables and corporate health of
manufacturing firms in India. Journal of Quantitative Economics, 11(1&2): 230-249.
Monecke, A. & Leisch, F. (2012). SEMPLS: Structural equation modeling using partial least
squares. Journal of Statistical Software, 48(3): 1-32.
Murcia, F. C. S., Fernando, D. M., Suliani, R. & José, A. B. (2014). The determinants of credit
rating: Brazilian evidence. Brazilian Administration Review, 11(2): 188-209.
Namazi, M. & Ghadiryian Arani, M. H. (2014). Investigation of the relationship between
bankruptcy risk, intellectual capital and its components for the companies listed on Tehran
stock exchange. Journal of Empirical Research in Accounting, 3(3): 115-141. [In Persian]
Namazi, M., Kazemnezhad, M. & Nematollahi, M. M. (2017). Comparing different feature
selection methods in financial distress prediction of the firms listed on Tehran stock
exchange. Financial Engineering and Portfolio Management, 7(29): 193-212. [In Persian]
Ooghe, H. & De Prijcker, S. (2008). Failure processes and causes of company bankruptcy: A
typology. Management Decision, 46(2): 223-242.
Opler, T. & Titman, S. (1994). Financial distress and corporate performance. Journal of
Finance, 49(3): 1015-1040.
Payam, M. A. & Setayesh, M. H. (2015). The effect of macroeconomic variables on the
bankruptcy risk of listed companies on Tehran stock exchange. Applied Mathematics in
Engineering, Management and Technology, 3(3): 358-363.
Pervan, M. & Visic, J. (2012). Influence of firm size on its business success, Croatian
Operational Research Review, 3: 213-223.
Persakis, A. & Iatridis, G. E. (2015). Earnings quality under financial crisis: A global empirical
investigation. Journal of Multinational Financial Management, 30: 1-35.
Pindado, J. Rodrigues, L. & De la Torre, C. (2008). Estimating financial distress likelihood.
Journal of Business Research, 61: 995-1003.
Corporate Default Prediction among Tehran Stock Exchange’s Selected Industries 57
Platt, H. D. (2010). Lead with cash: Cash flow for corporate renewal. London: Imperial
College Press.
Pretorius, M. (2009). Defining business decline, failure and turnaround: A content analysis.
The Southern African Journal of Entrepreneurship and Small Business Management, 2(1):
1-16.
Qu, Y. (2006). Macroeconomic factors and probability of default. Master Thesis, Stockholm
School of Economics.
Ramooz, N. & Mahmoudi, M. (2017). Predicting financial bankruptcy risk using hybrid model
in Tehran stock exchange. Journal of Financial Management Strategy, 5(16): 51-75. [In
Persian]
Sadeghi, H., Rahimi, P. & Salmani, Y. (2015). The effect of macroeconomic and governance
factors on financial distress in manufacturing firms listed on Tehran stock exchange.
Financial Monetary Economics, 21(8): 107-127. [In Persian]
Schipper, K. & Vincent, L. (2003). Earnings quality. Accounting Horizons, 17: 97-110.
Situm, M. (2014). The age and size of the firm as relevant predictors for bankruptcy. Journal of
Applied Economics and Business, 2(1): 5-30.
Srinidhi, B., Gul, F. A. & Tsui, J. (2011). Female directors and earnings quality. Contemporary
Accounting Research, 28(5): 1610-1644.
Stenbäck, T. (2013). Corporate default prediction with financial ratios and macroeconomic
variables. Master Thesis, Aalto University.
Switzer, L. N., Wang, J. & Zhang, Y. (2016). Effect of corporate governance on default risk in
financial versus nonfinancial firms: Canadian evidence. Available at:
https://doi.org/10.1002/cjas.1423.
Taremi, K. & khodaverdi, Y. (2015). Investigating the effect of macroeconomic variables on
financial distress among the companies listed on Tehran stock exchange (Case study:
pharmaceutical companies). Available at: https://www.civilica.com/Paper-ICMBA01-
ICMBA01_108.html.
Tinoco, M. H. & Wilson, N. (2013). Financial distress and bankruptcy prediction among listed
companies using accounting, market and macroeconomic variables. International Review of
Financial Analysis, 30: 394-419.
Titman, S. (1984). The effect of capital structure on a firm’s liquidation decision. Journal of
Financial Economics, 13(1): 137-151.
Trujillo-Ponce, A., Samaniego-Medina, R. & Cardone-Riportella, C. (2014). Examining what
best explains corporate credit risk: Accounting-based versus market-based models. Journal
of Business Economics and Management, 15(2): 253-276.
Vassalou, M. & Xing, Y. (2004). Default risk in equity returns. Journal of Finance, 49(2): 831-
868.
Vazifehdust, H. & Zangene, T. (2015). A hybrid bankruptcy prediction model based on
GMDH-type neural network and genetic algorithm for Tehran stock exchange listed
companies. Journal of Strategic Management Researches, 21(57): 83-100. [In Persian]
Wang, J. (2012). Do firms’ relationships with principal customers/suppliers affect shareholders'
income? Journal of Corporate Finance, 18: 860-878.
Wang, Y. (2011). Corporate default prediction: models, drivers and measurements. Ph.D.
Thesis, The University of Exeter.
Wijn, M. F. C. M. & Bijnen, E. J. (2001). Firm size and bankruptcy elasticity. Working Paper,
Tilburg University.
Wu, WW. (2010). Beyond business failure prediction. Expert Systems with Applications,
37(3): 2371-2376.
58 Iranian Journal of Finance
Xia, Y. (2016). The real effects of stock market liquidity. Ph.D. Thesis, University of Hong
Kong.
Xiong, B., Skitmore, M. & Xia, B. (2015). A critical review of structural equation modeling
applications in construction research. Automation in Construction, 49: 59-70.
returns? Some empirical results. Accounting & Finance, 54(3): 671-696.
Ahmadpour, A., Shahsavari, M. & Amoozad Khalili, A. (2016). Investigation of important
factors on risk of financial bankruptcy. Empirical Studies in Financial Accounting
Quarterly, 13(51): 9-34. [In Persian]
Aleksanyan, L. & Huiban, JP. (2016). Economic and financial determinants of firm
bankruptcy: Evidence from the French food industry. Review of Agricultural, Food and
Environmental Studies, 97(2): 89-108.
Amendola, A., Restaino, M. & Sensini, L . (2015). An analysis of the determinants of financial
distress in Italy: A competing risks approach. International Review of Economics &
Finance, 37: 33-41.
Arasti, Z. (2011). An empirical study on the causes of business failure in Iranian context.
African Journal of Business Management, 5(17): 7488-7498.
Asquith, P., Gertner, R. & Sharfstein, D. (1994). Anatomy of financial distress: An explanation
of junk bond issuers. The Quarterly Journal of Economics, 109(3): 625-658.
Atsu, F. & Costantini, M. (2015). Modelling corporate failure dependence of UK public listed
firms. Working Paper, Brunel University.
Banerjee, S., Dasgupta, S. & Kim, Y. (2008). Buyer–supplier relationships and the stakeholder
theory of capital structure. Journal of Finance, 63(5): 2507–2552.
Bellovary, J. L., Giacomino, D. L. & Akers, M. D. (2005). Earnings quality: It’s time to
measure and report. The CPA Journal, 75: 32-37.
Berryman, J. (1983). Small business failure and bankruptcy: A survey of the literature.
European Small Business Journal, 1(4): 47-59.
Bhattacharjee, A., Higson, C., Holly, S. & Kattuman, P. (2009). Macroeconomic instability and
business exit: Determinants of failures and acquisitions of UK firms. Economica, 76(301):
108-131.
Bottazzi, G., Grazzi, M., Secchi, A. & Tamagni, F. (2011). Financial and economic
determinants of firm default. Journal of Evolutionary Economics, 21(3): 373-406.
Brogaard, J., Li, D. & Xia, Y. (2017). Stock liquidity and default risk. Journal of Financial
Economics, 124(3): 486-502.
Byström, H. (2006). Merton unraveled: a flexible way of modeling default risk. Journal of
Alternative Investments, 8(4): 39-47.
Byström, H., Worasinchai, L. & Chongsithipol, S. (2005). Default risk, systematic risk and Thi
firms before, during and after the Asian crisis. Research in international business and
finance, 19(1): 95-110.
Camacho-Miñano, M. M. & Moreno, A. (2016). Can we sense bankruptcy using the content of
management reports? Working Paper, Complutense University of Madrid.
Charalambakis, E. C., Espenlaub, S. K. & Garrett, I. (2009). Assessing the probability of
financial distress of UK firms. Working Paper, University of Manchester.
Charitou, A., Lambertides, N. & Trigeorgis, L. (2011). Distress risk, growth and earnings
quality. ABACUS, 47(2): 158-181.
Chen, L. H. & Jiang, G. J. (2001). The determinants of Dutch capital structure choice. Working
Paper, University of Groningen.
Christidis, A. & Gregory, A. (2010). Some new models for financial distress prediction in the
UK. Available at: https://ssrn.com/abstract=1687166.
Cornaggia, K. J., Krishnan, G. V. & Wang, C. (2017). Managerial ability and credit ratings.
Contemporary Accounting Research, 34(4): 2094-2122.
54 Iranian Journal of Finance
Crosbie, P. & Bohn, J. (2003). Modeling default risk. Moody's KMV.
Davari, A. & Rezazadeh, A. (2016). Structural Equation Modeling with PLS (Third Ed.).
Tehran: Publication of Iranian Student Booking Agency (Jahad-e Daneshgahi). [In Persian]
Delkhosh, M. & Malek, Z. (2016). The role of earnings quality in predicting bankruptcy of
firms listed on Tehran stock exchange. Management and Accounting Researches, 24: 105-
119. [In Persian]
Denis, D. J. & Denis, D. K. (1995). Causes of financial distress following leveraged
recapitalizations. Journal of Financial Economics, 37(2): 129-157.
di Donato, F. & Nieddu, L. (2016). A new proposal to predict corporate bankruptcy in Italy
during the 2008 economic crisis. In: Huynh, VN., Kreinovich, V. & Sriboonchitta, S.
(editors). Causal Inference in Econometrics. Studies in Computational Intelligence. Cham:
Springer, 2016, 622: 213-223.
Ebrahimi, S. K., Bahraminasab, A. & Mamashli, R. (2017). The effect of financial crisis on
earnings quality. Journal of the Accounting and Auditing Review, 23(4): 415-434. [In
Persian]
Edwards, J. R. & Bagozzi, R. P. (2000). On the nature and direction of relationships between
constructs and measures. Psychological Methods, 5(2):155-174.
Eriksson, P. E. & Pesämaa, O. (2007). Modelling procurement effects on cooperation.
Construction Management and Economics, 25(8): 893-901.
Evans, M. H. (2015). Turnarounds for distressed companies. Retrieved June 21, 2017, from
http://www.exinfm.com/board/turnarounds_distressed_company.htm.
Fadaeinejad, M. E., Shahriary, S. & Salim, F. (2015). An analysis of the relationship between
financial distress risk and equity returns. Journal of the Accounting and Auditing Review,
22(2): 243-262. [In Persian]
Fawzi, N. S., Kamaluddin, A. & Sanusi, Z. M. (2015). Monitoring distressed companies
through cash flow analysis. Procedia Economics and Finance, 28: 36-144.
Feizmohammadi, R. (2014). Financial crisis and bankruptcy prediction of Tehran stock
exchange listed firms using accounting, market and macroeconomic variables. Master
Thesis, Tarbiat Modares University. [in Persian]
Fernandez, G. (2012). A comprehensive study of bankruptcy prediction: accounting ratios,
market variables, and microstructure. Ph.D. Thesis, Florida International University.
Finkel, S. E. (2007). Linear panel analysis. In: Menard, S. (editor). Handbook of Longitudinal
Research: Design, Measurement, and Analysis (First Ed.). Waltham, MA: Academic Press,
2007: 475-504.
Fischinger, S. (2017). Earnings quality and European companies' access to credit. Master
Thesis, Ghent University.
Francis, J., LaFond, R., Olsson, P. & Schipper, K. (2004). Costs of equity and earnings
attributes. The Accounting Review, 79(4): 967-1010.
García Lara, J., García Osma, B. & Neophytou, E. (2009). Earnings quality in ex-post failed
firm. Accounting and Business Research, 39(2), 119-138.
Gaskill, L. R., Van Auken, H. E. & Manning, R. A. (1993). A factor analytic study of the
perceived causes of small business failure. Journal of Small Business Management, 31(4):
18-31.
Gilbert, L. R., Menon, K. & Schwartz, K. B. (1990). Predicting bankruptcy for firms in
financial distress. Journal of Business Finance & Accounting, 17(1): 161-171.
Gilson, S. C. (1989). Management turnover and financial distress. Journal of Financial
Economics, 25: 241-262.
Corporate Default Prediction among Tehran Stock Exchange’s Selected Industries 55
Giordani, P., Jacobson, T., von Schedvin, E. & Villani, M. (2014). Taking the twists into
account: Predicting firm bankruptcy risk with splines of financial ratios. Journal of
Financial and Quantitative Analysis, 49(4): 1071-1099.
Gitman, L. J. (1998). Principle of managerial finance. Working Paper, Harper Collins College.
González-Aguado, C. & Moral-Benito, E. (2013). Determinants of corporate default: A BMA
approach. Applied Economics Letters, 20(6): 511-514.
Gupta, V. (2017). A survival approach to prediction of default drivers for Indian listed
companies. Theoretical Economics Letters, 7: 116-138.
Hajeb, H. R., Ghayouri Moghadam, A. & Ghaffari, M. J. (2014). Examining the effect of
managerial ability on capital structure in the pharmaceutical products and material industry.
Health Accounting, 3(3): 1-17. [In Persian]
Hamilton, B. (2014). The 9 biggest financial warning signs. Retrieved June 21, 2017, from
https://www.entrepreneur.com/article/239730.
Hazak, A. & Männasoo, K. (2007). Indicators of corporate default - An EU based empirical
study. Working Paper, Bank of Estonia.
Hill, N., Perry, S. & Andes, S. (2011). Evaluating firms in financial distress: An event history
analysis. Journal of Applied Business, 12(3): 60-71.
Hillegeist, S. A., Keating, E. K., Cram, D. P. & Lundstedt, K. G. (2004). Assessing the
probability of bankruptcy. Review of Accounting Studies, 9: 5-22.
Howe, J. S. & Houston, R. (2016). Earnings management, earnings surprises, and distressed
firms. Accounting and Finance Research, 5(1): 64-87.
Hozhabri, F. (2016). Examining the relationship between corporate life cycle and restructuring:
Evidence from financially distressed firms listed on Tehran stock exchange. Master Thesis,
Yazd University. [In Persian]
Jantadej, P. (2006). Using the combinations of cash flow components to predict financial
distress. Ph.D. Thesis, University of Nebraska Lincoln.
Jorion, P. (2009). Risk management lessons from the credit crisis. European Financial
Management, 15(5): 923-933.
Kale, J. R. & Shahrur, H. (2007). Corporate capital structure and the characteristics of supplier
and customer markets. Journal of Financial Economics, 83: 321-365.
Karami, A. (2017). Examining the effect of managerial ability on financial distress with an
emphasis on financial felexibility as a mediator variable in firms listed on Tehran stock
exchange. Master Thesis, Urmia University. [In Persian]
Ke, R. (2012). Predicting financial distress: The role of earnings quality. Ph.D. Thesis,
University of California.
Kim, Y. & Sohn, S. Y. (2008). Random effects model for credit rating transitions. European
Journal of Operational Research, 184(2): 561-573.
Koopman, S. J., KrÄaussl, R., Lucas, A. & Monteiro, A. B. (2009). Credit cycles and
macrofundamentals. Journal of Empirical Finance, 16: 42-54.
Kordestani, GH. & Tatli, R. (2014). Earnings quality and firms' financial position. Journal of
Accounting and Auditing Studies, 3(11): 4-19. [In Persian]
Korol, T. (2013). Early warning models against bankruptcy risk for Central European and
Latin American enterprises. Economic Modelling, 31: 22-30.
Lau, A. HL. (1987). A five-state financial distress prediction model. Journal of Accounting
Research, 25(1): 127-138.
Leung, M., Chan, Y., Chong, A. & Sham, J. (2008). Developing structural integrated stressorstress models for clients’ and contractors’ cost engineers. Journal of Construction
Engineering and Management, 134(8): 635-643.
56 Iranian Journal of Finance
Li, D. & Xia, Y. (2015). The effect of stock liquidity on default risk. Working Paper,
University of Hong Kong.
Li, F., Abeysekera, I. & Ma, S. (2013). Earnings quality and stress levels of Chinese listed
companies. Academy of Taiwan Business Management Review, 9(1): 109-116.
Li, F., Abeysekera, I. & Ma, S. (2014). The effect of financial status on earnings quality of
Chinese listed firms. Journal of Asia-Pacific Business, 15(1): 4-26.
Lussier, R. N. & Halabi, C. E. (2010). A three-country comparison of the business success
versus failure prediction model. Journal of Small Business Management, 48(3): 360-377.
Mardani, M., Fallah, R. & Golestani, R. (2016). A review of the relationship between the
structure of corporate governance and financial distress (financial crisis) in companies
listed on Tehran stock exchange. Account and Financial Management Journal, 1(4): 208-
226.
Mashayekhi, B. & Ganji, H. (2014). The effect of earnings quality on predicting bankruptcy by
using artificial neural networks. The Financial Accounting and Auditing Researches, 6(22):
147-173. [In Persian]
Medhat, M. (2015), Measuring and pricing the risk of corporate failures. Ph.D. Thesis,
Copenhagen Business School.
Mehrani, S., Kamyabi. Y. & Ghayour, F. (2017). Reviewing the effectiveness of earnings
quality indices on the power of financial distress prediction models. Journal of the
Accounting and Auditing Review, 24(1): 103-126. [In Persian]
Mertens, R. L., Poddig, T. & Fieberg, C. (2016). Forecasting corporate defaults in the German
stock market. Working Paper, Available at: http://ssrn.com/abstract=2833454.
Mishra, P. S. (2013). Relationship between macroeconomic variables and corporate health of
manufacturing firms in India. Journal of Quantitative Economics, 11(1&2): 230-249.
Monecke, A. & Leisch, F. (2012). SEMPLS: Structural equation modeling using partial least
squares. Journal of Statistical Software, 48(3): 1-32.
Murcia, F. C. S., Fernando, D. M., Suliani, R. & José, A. B. (2014). The determinants of credit
rating: Brazilian evidence. Brazilian Administration Review, 11(2): 188-209.
Namazi, M. & Ghadiryian Arani, M. H. (2014). Investigation of the relationship between
bankruptcy risk, intellectual capital and its components for the companies listed on Tehran
stock exchange. Journal of Empirical Research in Accounting, 3(3): 115-141. [In Persian]
Namazi, M., Kazemnezhad, M. & Nematollahi, M. M. (2017). Comparing different feature
selection methods in financial distress prediction of the firms listed on Tehran stock
exchange. Financial Engineering and Portfolio Management, 7(29): 193-212. [In Persian]
Ooghe, H. & De Prijcker, S. (2008). Failure processes and causes of company bankruptcy: A
typology. Management Decision, 46(2): 223-242.
Opler, T. & Titman, S. (1994). Financial distress and corporate performance. Journal of
Finance, 49(3): 1015-1040.
Payam, M. A. & Setayesh, M. H. (2015). The effect of macroeconomic variables on the
bankruptcy risk of listed companies on Tehran stock exchange. Applied Mathematics in
Engineering, Management and Technology, 3(3): 358-363.
Pervan, M. & Visic, J. (2012). Influence of firm size on its business success, Croatian
Operational Research Review, 3: 213-223.
Persakis, A. & Iatridis, G. E. (2015). Earnings quality under financial crisis: A global empirical
investigation. Journal of Multinational Financial Management, 30: 1-35.
Pindado, J. Rodrigues, L. & De la Torre, C. (2008). Estimating financial distress likelihood.
Journal of Business Research, 61: 995-1003.
Corporate Default Prediction among Tehran Stock Exchange’s Selected Industries 57
Platt, H. D. (2010). Lead with cash: Cash flow for corporate renewal. London: Imperial
College Press.
Pretorius, M. (2009). Defining business decline, failure and turnaround: A content analysis.
The Southern African Journal of Entrepreneurship and Small Business Management, 2(1):
1-16.
Qu, Y. (2006). Macroeconomic factors and probability of default. Master Thesis, Stockholm
School of Economics.
Ramooz, N. & Mahmoudi, M. (2017). Predicting financial bankruptcy risk using hybrid model
in Tehran stock exchange. Journal of Financial Management Strategy, 5(16): 51-75. [In
Persian]
Sadeghi, H., Rahimi, P. & Salmani, Y. (2015). The effect of macroeconomic and governance
factors on financial distress in manufacturing firms listed on Tehran stock exchange.
Financial Monetary Economics, 21(8): 107-127. [In Persian]
Schipper, K. & Vincent, L. (2003). Earnings quality. Accounting Horizons, 17: 97-110.
Situm, M. (2014). The age and size of the firm as relevant predictors for bankruptcy. Journal of
Applied Economics and Business, 2(1): 5-30.
Srinidhi, B., Gul, F. A. & Tsui, J. (2011). Female directors and earnings quality. Contemporary
Accounting Research, 28(5): 1610-1644.
Stenbäck, T. (2013). Corporate default prediction with financial ratios and macroeconomic
variables. Master Thesis, Aalto University.
Switzer, L. N., Wang, J. & Zhang, Y. (2016). Effect of corporate governance on default risk in
financial versus nonfinancial firms: Canadian evidence. Available at:
https://doi.org/10.1002/cjas.1423.
Taremi, K. & khodaverdi, Y. (2015). Investigating the effect of macroeconomic variables on
financial distress among the companies listed on Tehran stock exchange (Case study:
pharmaceutical companies). Available at: https://www.civilica.com/Paper-ICMBA01-
ICMBA01_108.html.
Tinoco, M. H. & Wilson, N. (2013). Financial distress and bankruptcy prediction among listed
companies using accounting, market and macroeconomic variables. International Review of
Financial Analysis, 30: 394-419.
Titman, S. (1984). The effect of capital structure on a firm’s liquidation decision. Journal of
Financial Economics, 13(1): 137-151.
Trujillo-Ponce, A., Samaniego-Medina, R. & Cardone-Riportella, C. (2014). Examining what
best explains corporate credit risk: Accounting-based versus market-based models. Journal
of Business Economics and Management, 15(2): 253-276.
Vassalou, M. & Xing, Y. (2004). Default risk in equity returns. Journal of Finance, 49(2): 831-
868.
Vazifehdust, H. & Zangene, T. (2015). A hybrid bankruptcy prediction model based on
GMDH-type neural network and genetic algorithm for Tehran stock exchange listed
companies. Journal of Strategic Management Researches, 21(57): 83-100. [In Persian]
Wang, J. (2012). Do firms’ relationships with principal customers/suppliers affect shareholders'
income? Journal of Corporate Finance, 18: 860-878.
Wang, Y. (2011). Corporate default prediction: models, drivers and measurements. Ph.D.
Thesis, The University of Exeter.
Wijn, M. F. C. M. & Bijnen, E. J. (2001). Firm size and bankruptcy elasticity. Working Paper,
Tilburg University.
Wu, WW. (2010). Beyond business failure prediction. Expert Systems with Applications,
37(3): 2371-2376.
58 Iranian Journal of Finance
Xia, Y. (2016). The real effects of stock market liquidity. Ph.D. Thesis, University of Hong
Kong.
Xiong, B., Skitmore, M. & Xia, B. (2015). A critical review of structural equation modeling
applications in construction research. Automation in Construction, 49: 59-70.
)