Bankruptcy Risk Response to Adopting Diversification Strategies

The purpose of this study was to investigate the relationship between diversity and bankruptcy risk. The statistical population of this study includes all companies listed in Tehran Stock Exchange during 2018-2007. The sample is based on the systematic elimination method of 82 companies. The product diversification strategies are divided into related, unrelated, total, and competitive diversification. Also, the bankruptcy risk is based on the Z index. The method of research is based on multivariable regression with panel data model using ordinary least squares method. Research evidence suggests that by adopting product diversification strategies, companies' reaction to the bankruptcy risk is negative. In other words, companies can use diversification strategies as a mechanism to get rid of bankruptcy when they are in critical situations. With 1% increase in diversity strategies, the risk of bankruptcy in the direction of adoption of the diversification strategy was 2.20%, the non-relevant diversification strategy was 9.9%, the diversification strategy was 4.2% and the adoption of the competitive diversification strategy was 0/15% decreases.