The Effect of Cash Flow Risk on Corporate Bankruptcy with the Moderating Role of Earnings Management

Abstract

Entering the business world is accompanied by numerous challenges, one of the most important of which is cash flow management. Cash flow risk can expose companies to more serious risks such as bankruptcy. In this study, an attempt is made to examine the role of earnings management in moderating these effects by analyzing the data carefully and examining the relationships between cash flow risk and corporate bankruptcy. The statistical population of this study included all companies listed on the Tehran Stock Exchange between 1391 and 1401, and after applying research restrictions, 141 companies were selected as a statistical sample. To collect theoretical foundations and literature, a library method was used. The data required to test the hypotheses were collected by reviewing financial statements, explanatory notes, board reports, statistical archives of the Tehran Stock Exchange Organization, and the Kodal website. Then, by measuring the research variables, multiple regression analysis was used using Eviews software, version 12, to analyze the data. The results show that cash flow risk does not have a significant effect on corporate bankruptcy, so that changes in this risk alone cannot explain bankruptcy and require examining multiple factors. Instead, earnings management has a positive and significant effect on bankruptcy, so that companies that implement accrual earnings management are more exposed to bankruptcy. Also, accrual earnings management cannot moderate the effect of cash flow risk on corporate bankruptcy.