Predicting Financial Distress in Tehran Stock Exchange

Companies incur significant costs from the financial distress. Predicting financial distress will have an important role in preventing bankruptcy. The aim of the present study is to predict the financial distress costs using the Leland and Toft models, during ۱۹۹۶ and ۱۹۹۸. This study examines data relating to ۴۹ companies listed in the Tehran stock exchange collected over ten years from ۲۰۰۵ to ۲۰۱۴. Leland and Toft model (۱۹۹۶) considers the financial distress costs and benefits from the tax shield in general. However, Leland and Toft model (۱۹۹۸) considers the financial distress costs and benefits from the tax shield in detail by using  parameter. According to the research findings, the companies working in automotive industry are bankrupt, but the companies working in food and beverage, pharmaceutical, base metals and cement industries have a good distance from financial default. The results help to improve the decision-making process and to avoid the financial distress.

Keywords:

Financial Distress , Tax Shield , Leland and Toft model , Tehran Stock Exchange