The Effect of Macroeconomic and Governance Factors on Financial Distress in Manufacture Firms Listed in Tehran Stock Exchange

اقتصاد پولی مالی

Article 5, Volume 21, Issue 8, January 2015, Pages 107-127   

Document Type: پژوهشی

DOI: 10.22067/pm.v21i8.45860

Authors

Hossein Sadeghi^* ; Parisa Rahimi; Yunes Salmani

Abstract

Abstract
Financial distress caused by internal (Governance) and external (macroeconomic) factors can lead to a waste of resources. On the other hand, with the knowledge of the effectiveness of macroeconomic factors and Governance in financial distress, financial managers will be able to take appropriate actions to prevent financial distress. Investors also identify suitable opportunities to invest their own capital at minimum risk.
This study analyses the impact of macroeconomic and the Governance factors on Financial Distress in manufacturing companies listed in Tehran Stock Exchange during the period from 1382 to 1386, by using of panel Logit.
The results show that, firstly; of corporate governance factors; high levels of activity background, leverage ratio and ownership concentration increases the probability of financial distress and high levels of the firm size, agency costs, and Current Ratio reduce it.
Income and economic growth of firms reduce the probability of financial distress and inflation increases it. Secondly, the role of macroeconomic factors in health and financial distress of firms is far greater than the governance factors.

Keywords

Tehran Stock Exchange; financial distress; Logit model; Governance; Ownership Structure; current ratio; Inflation

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