Impacts of Intellectual Capital on the Firm's Probability of Bankruptcy: Evidence from Tehran Stock Exchange

The rapid technological changes, the intense competition of enterprises, and globalization have transformed the phenomenon of financial distress and corporate bankruptcy into a major issue in financial and investment literature. Bankruptcy attracted the attention of financial sector activists, including investors, lenders, suppliers, business partners, and governments. Considering the role of intellectual capital in organizations, one can expect that companies with a richer intellectual capital are more intelligent in avoiding bankruptcy. The purpose of this research is to investigate the role of intellectual capital and its components (including human capital, structural capital, and customer capital) on the firms’ probability of bankruptcy in Tehran Stock Exchange. For this purpose, the data of 147 firms from Tehran Stock Exchange that are selected by systematic elimination method were studied during the years 1387 to 1393. In order to measure the intellectual capital, the PULIC model and to assess the probability of bankruptcy, conversion of Zscore results (from Altman Model) to the probaility was used. Also, to test hypotheses, multivariate regression models with hybrid data have been used. The results of the hypothesis test show that intellectual capital and its components have reverse and significant effects on the firms’ probability of bankruptcy in Tehran Stock Exchange.