Determinants of Financial Distress of Listed Companies in Iran: An Emphasis on The Role of Bank-Specific Variables

This article aims to study the effect of banking features and relationships when companies suffer from financial distress. A question is addressed in this paper is that: are the chances of recovery or failure of a company experiencing financial distress associated with its banking relationships? To this end, data of 105 listed companies in Tehran Stock Exchange (TSE) is collected from 2007 to 2015. The database is analyzed by using the Probit regression model and EVIEWS. The results of the model estimations show that “The share of customers with overdue loans” is the most effective factor in corporate financial distress. Then, the “sanctions” variable is found to be the second most effective factor in this regard. Among the bank-firm relationship variables, “switching the main bank” is the most important factor affecting the financial distress. Also, Firm size is the most effective factor among the firm-specific variables.