Developing a Model to Identify the Factors Affecting the Bankruptcy of Companies in Iran

This paper aimed to examine the role of management errors and accounting errors in the factors causing bankruptcy in Iranian firms. Using random sampling method, fifteen experts were recruited to collect the qualitative data. A questionnaire was prepared and finalized using the Delphi method. As for quantitative data, 191 experts accountants, auditors, judges, and lawyers participated in data collection. Research questions examined the relationships between five confounding variables with each other and the items of measurement of each confounding variable with the related variable by employing structural equation modeling method with partial least squares approach and LISREL software. The sample included 191 experts in bankruptcy. Regression was used to test the research questions, the results showed that five factors of managerial errors, criminal conducts, environmental crises, accounting errors, and unpredicted events were major causes of bankruptcy in Iranian firms, with managerial errors being the most important one. Therefore, using modern management techniques at different levels of firms will be useful in preventing managerial errors in decision making and rescuing firms from bankruptcy