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Financial Distress Prediction in Emerging Market: Empirical Evidences from Iran

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Author(s): Mahdi Salehi | Bizhan Abedini

Journal: Business Intelligence Journal
ISSN 1918-2325

Volume: 2;
Issue: 2;
Start page: 398;
Date: 2009;
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Keywords: Financial Ratio | Prediction | Bankruptcy | Financial Distress | Tehran Stock Exchange

ABSTRACT
In this article the ability of financial ratios for prediction of financial distress of the listed companies in Tehran Stock Exchange (TES) was investigated. For this reason, the multiple regression models were used and a model was presented for prediction of financial distress in listed companies in TES. The assessment of the model was done by utilizing the data of two groups. The first group contained 30 companies which don't have any financial distress, and the second group, similarly, contained 30 companies which have financial distress. The presented model was according to five the ratios, namely; ratios indicate liquidity, profitability, managing of debt and managing of property. The statistical results of the model indicate the validity of that model and the selected ratios. The results of the test of the ability of model prediction indicate the reality that the model designed four years before financial distress in companies; present a correct prediction about the financial distress.
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