Investigating the effect of some mechanisms of corporate governance and conservatism on the ability of prediction of bankruptcy models

Investors always seek to acquire the data of investing options to invest well and allocate the resources optimally. Predicting of financial performance is one of the most effective variables which can help the investors in their optimal recourses allocation. There are a lot of studies regarding the prediction of corporate bankruptcy. Most of them consider “financial ratios” and “corporate size” as the variables effecting on corporate bankruptcy. This study aims to discuss about the new areas by introducing the variables of “Duality in task of manager”, “Institutional Ownership of Stocks” and “Conservatism” as the variables effecting on the ability of bankruptcy models. The statistical population of this research includes firms listed on Tehran Stock Exchange (TSE). Therefore, after applying sampling constraints, 90 firms examined. In order to test the hypotheses of research, Logit model was used. The results showed that adding the variables of corporate governance and conservatism can prove the correctness of prediction.

bankruptcy, financial performance, duality of task of managers, institutional ownership of stocks, Logit model, earnings per share