Investigating the impact of earnings management and business strategy on bankruptcy risk (A case study: companies listed on the Tehran Stock Exchange)

Document Type : Original Article

Authors

M.A. in Accounting, University of Allameh Mohaddes Noori, Mazandaran, Iran

Abstract

This study investigates the effect of earnings management and business strategy on bankruptcy risks in companies listed on Tehran Stock Exchange. To measure profit management, accruals-based earnings management was used using the correction Jones model, and to measure the impact of business strategy, cost leadership indicators and differentiation strategies were used, and to measure bankruptcy risk variables, The Altman Z method is used. This research is empirical in terms of purpose and descriptive in nature, and in order to analyze the data and extract the results of the research, Eviews software was used. To test the hypotheses, a sample of 780 observations during a five-year period from 2015 to 2019 have been selected. The results show that earnings management has a significant and direct effect on bankruptcy risk. On the other hand, the results show that differentiation strategy and cost leadership strategy have an insignificant and negative effect on bankruptcy risk. This is interpreted as by increasing cost leadership and differentiation strategy, bankruptcy risk decreases.

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Volume 3, Issue 3
September 2020
Pages 99-113
  • Receive Date: 14 July 2020
  • Revise Date: 31 July 2020
  • Accept Date: 20 August 2020