An Investigation into the Effects of Insolvency and Capital Structure on comparability of financial statements

Vaez, Seyyed Ali; Mazaheri, Esmaeil; Anvari, Ebrahim; Armoonmanesh, Zeynab

An Investigation into the Effects of Insolvency and Capital Structure on comparability of financial statements

Document Type : Original Article

Authors

Seyyed Ali Vaez ¹

Esmaeil Mazaheri ²

Ebrahim Anvari ³

Zeynab Armoonmanesh ⁴

¹ Accounting,economics and scinces faculty. Shahid Chamran university of Ahwaz,Ahwaz,Iran

² accounting,economics ans society sciences faculty,Shahid Chamran university of Ahwaz,,Ahwaz,Iran.

³ accounting,economics and society sciences faculty,Shahid Chamran university of Ahwaz,Ahwaz,Iran.

⁴ accounting,economics and society scinces faculty,Shahid Chamran university of Ahwaz,Ahwaz,Iran.

Abstract

All investors, legislators and researchers put emphasis on the importance of comparability of financial statements. Comparability of financial statements has been recognized as important feature in financial reporting and promoting usefulness of accounting information. The purpose of this research study was to investigate the effect of financial distress and capital structure on comparability of financial statements of the accepted companies in stock markets of Tehran. To this end, 108 companies accepted in stock exchange of Tehran from 1387 to 1396 were selected through systematic random sampling. To test the research hypotheses, we utilized mixed data. The outcome of testing the first and second hypotheses showed that financial distress and capital structure respectively each independently had meaningful, direct and negative effects on the comparability of financial statements. However, the result of testing the third hypothesis indicated that financial health (reverse financial distress) and capital structure had a significant and direct effect on comparability of financial statements of companies.

Keywords

conceptual framework

Quality characteristic of financial information

Financial distress

Capital structure

comparability of Financial statement