Investigation of the effect of the value added, earning quality and leverage ratio on bankruptcy in organizations accepted in Tehran’s stock market

Abstract

The recent bankruptcy of large organizations, internationally, and the frequency of stocks in the stock and share market in Iran show the necessity of some tools in order to evaluate the financial ability of organizations. One of the tools for evaluating the financial ability of organizations is using the key criteria as an independent variable and analyzing some earning figures to study the bankruptcy of organizations. This article is going to investigate the effect of economic value added, earning quality and leverage ratio on the bankruptcy of the amount of credit indexes in Tehran’s stock and shares market. The results of the research will show that in accepting organizations in stock and share market of Tehran, the economic criteria of value added and the leverage ratios are better indexes to predict the bankruptcy and are able to show the possibility of bankruptcy to the shareholders. One of the other results of this research is to mention that the economic value added is an index which is capable to be exchanged with other indicators of performance evaluation for managers and owners in order to achieve the goal of maximizing the wealth of shareholders.