Bankruptcy Prediction, Accounting Variables and Economic Development: Empirical Evidence from Iran

  •  Gholamreza Karami    
  •  Navid Attaran    
  •  Seyed Mostafa Seyed Hosseini    
  •  Seyed Mojtaba Seyed Hossein    


One of the key factors in reaching economic development and accelerating its growth is increasing investment opportunities. However investment resources are scarce especially in developing countries, thus its efficient allocation between those activities with higher efficiency is noteworthy. Financial reports extracted from accounting systems are somehow viewed as rich financial media facilitating economic decision making. In this regard, assessing firm’s financial condition via accounting indicators can in fact help investors in decision making process, prevent resource wastage and expedite economic development. The purpose of this research is to study the usefulness of accounting information in predicting financial condition of companies listed in Tehran Stock Exchange between 2004 and 2010 using a Genetic Algorithm model, further to improve results generalization, cross validation is executed. The GA model predicted financial condition of sample firms one year ahead with 90.3% of accuracy and 1.7% standard deviation.

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