This study aims to investigate the effect of corporate social responsibility disclosure (CSRD) on financial distressed risk (FDR) among firms listed on the Tehran Stock Exchange (TSE). This paper also examines whether there is a negative linkage between institutional ownership as a corporate governance mechanism and corporate bankruptcy. The final research purpose is to analyze if there is a moderating effect of institutional owners on the relationship between CSRD and FDR too. The study sample consists of 200 firms listed on the TSE between 2013 and 2018, and the statistical model is logistic regression. When FDR is assessed under both Article 141 of Iran’s business law and the Altman Z-score model, our results on the main research hypotheses are quite similar. Considering the social and cultural conditions and economic situation of the Iranian market, the results show that firms with a high level of CSR disclosure are not able to make themselves more creditworthy and do not have better access to financing, resulting in more financial insolvency. Our findings confirm institutional shareholders play a vital role in facilitating a firm’s emergence from bankruptcy. The results also demonstrate financial distress risk is less seen among companies with more institutional owners that disclose more CSR information. In other words, since the goals related to CSR are long-term and Iranian institutional investors have a long-term horizon towards the company, the presence of more institutional owners within a firm push managers to provide additional voluntary CSR disclosure so firms can maintain the trust of their shareholders at the highest possible level and prevent financial distress. Our additional analysis indicates there is a positive association between financial leverage and firm failure, whereas the current ratio and ROA are negatively connected with corporate bankruptcy. Finally, when FDR is assessed on the Altman Z-score model, our evidence supports a negative relation between purchase and sale-related party transactions and bankruptcy risk, which is consistent with the efficient transaction hypothesis.
The main aim of this study is to separate the origins of "selling, general, and administrative costs (SG&A)" and "cost of goods sold (COGS)" stickiness, and investigate their sources effects on earnings forecast accuracy (EFA). In previous research, various micro and macro factors have been shown to affect asymmetric cost behavior. These factors are rooted in the industry and firm-specific characteristics or specific events, which may occur each year at national or international scales. In this study, in the first step, a new methodology is presented to separate the sources of cost stickiness, including a novel method for calculating cost stickiness for each firm-year. In the second step, we investigated the effect of each firm-year stickiness and each source of stickiness on the EFA. The statistical population of the study consisted of all companies listed on the Tehran Stock Exchange, from which 1080 observations in 2014-2018 period were selected and reviewed. Our results indicated that EFA has a negative and significant relationship with SG&A and COGS stickiness, stickiness of each year and each company, but no significant relationship was found with stickiness of each industry. Our results demonstrated that the stickiness of SG&A to COGS has a greater effect on the EFA. The findings suggest that the events of each year and the intra-organizational events of each company have a greater impact on cost behavior. Hence, it is necessary for managers and financial analysts to take into account each source of cost stickiness, especially year-specific events and firm-specific characteristics, and consider their effects in earnings forecast to improve their EFA.
Purpose
This research attempts to obtain the effect of unobservable firm-specific characteristics on selling, general and administrative (SG&A) cost stickiness by using panel data.
Design/methodology/approach
For this purpose, first, the authors describe the one-way error component regression model in panel data and presented that unobservable individual effect how could be estimated. Then the authors tested this panel data’s ability by estimating the effect of unobservable firm-specific characteristics on SG&A stickiness.
Findings
The authors find, for 195 firm-year of the industrial sector over 5 years, the SG&A costs increase on average at a rate of 0.76% per 1% increase in sales but decrease only 0.51% per 1% decrease in sales. In addition, the authors find that the unobservable characteristics of each company have different effects on SG&A cost stickiness.
Originality/value
As the present study is the pioneer study on describe the one-way error component regression model in panel data and presented the unobservable individual effects. The findings of this study can contribute to the realm of this study and the related literature.
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