Accruals Quality and Bankruptcy in Shirata Model (Case Study: Tehran Stock Exchange)

Oveis Bagheri () and Mona Ranjbaran Jalili ()
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Oveis Bagheri: Faculty of Management, University of Tehran
Mona Ranjbaran Jalili: Department of Accounting, Fontbonne University

Journal of Money and Economy, 2020, vol. 15, issue 4, 381-402

Abstract: In this research, the relationship between accruals quality and bankruptcy of companies has been studied. According to Dechow et al.'s (1995) model, the quality of accruals was measured, and according to the Shirata model (1998), bankruptcy was examined. Operations were considered as the control variables. The research hypothesis was tested using a multivariate regression model and a combined data method. The study's statistical sample consists of 197 companies listed on the Tehran Stock Exchange from 2011 to 2019. The results showed a significant and negative relationship between the quality of accruals and bankruptcy of the companies. It means that in bankruptcy, the use of earnings management through optional accruals reduces the quality of accruals. The results indicate that size, return on assets, and audit quality all significantly impact the quality of accruals. Besides, the leverage, life, and operating cash flow have a significant and negative effect on accruals' quality. However, the ratio of market value to book value does not significantly affect the quality of accruals.

Keywords: Quality of Accruals; Bankruptcy; Shirata Model; Tehran Stock Exchange; Profit Management (search for similar items in EconPapers)
JEL-codes: A11 G33 H83 (search for similar items in EconPapers)
Date: 2020
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