Predicting the Financial Distress of Companies Using Piotrowski's F-Score Model

Bardia Khalilian

doi:10.22105/aaa.v1i1.17

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Bardia Khalilian * Department of Management and International Business (MIB), University of Auckland, 1142 Auckland, New Zealand.

https://doi.org/10.22105/aaa.v1i1.17

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Abstract

Financial distress is a severe issue for the economic life of countries, and its prediction is of great importance for different groups of users, including managers, banks, investors and policymakers. Therefore, this research aims to predict the financial distress of companies listed on the Tehran Stock Exchange using Piotrowski's F-Score model. For this purpose, company information was collected for 113 companies in 9 years from 2014 to 2022. The multivariable regression method based on the logistic analysis was used to test research hypotheses. The study results indicate a negative and significant relationship between the Piotroski F score and the possibility of financial distress. In other words, Piotrowski's F-Score model is well able to predict helpless companies so that companies can prevent their bankruptcy by making correct and logical decisions. Also, the results showed that the increase in operating cash flow and efficiency assets and reduction of accruals could reduce companies' financial distress in the Tehran Stock Exchange.

Keywords

Financial distress Forecasting Piotroski

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Predicting the Financial Distress of Companies Using Piotrowski's F-Score Model

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