Relationship between earnings quality and bankruptcy risk

The main object of the current study is to investigate the effect of earnings quality on insolvency of the listed companies on Tehran Stock Exchange. To achieve this aim، Ohlson and Altman models were applied for evaluating insolvency as the dependent variable، also optional obligation items and adjusted optional obligation items were used to evaluate the firms'' earnings quality as the independent variable. Control variables، including firm size، return of assets، and financial leverage، were used to consider other effective variables during 2007-2012. For testing research hypotheses، multiple linear regression model were employed. The results indicate that by using Altman model for assessing insolvency، there is a direct and significant relationship between the variables of optional obligation items and adjusted optional obligation items on the one hand and insolvency on the other hand. However this very relationship is reverse and significant via using Ohlson model.