Predicting Financial Health with a Legalistic AI Approach Emphasizing the Role of Governance System Criteria

Financial health means the ability to profitability and continuity of activity of the economic unit, which is very important for all shareholders and stakeholders, and basically all stakeholders in economic units are interested in having appropriate tools that can assess and predict the profitability and continuity of activity. The purpose of this study is to identify the factors affecting financial health and predict the degree of financial health of companies listed on the Tehran Stock Exchange. For this purpose, the data of 138 companies (1104 companies-years) during the years 2011 to 2018 and Matlab software were used to test the research hypotheses. Variable selection test performed using artificial intelligence algorithm to analyze neighboring components showed that among the criteria of the management system, the ratio of non-executive managers, the ratio of institutional owners, the size of the audit committee and the independence of the audit committee and change of CEO to explain the financial health of companies. Also, in order to predict the degree of financial health of companies listed on the Tehran Stock Exchange, the decision-oriented algorithm of the decision tree was used. The financial health of companies listed on the Tehran Stock Exchange