The aim of this study is to investigate the effects of firm bankruptcy risk and auditing factors on the market value of firms and to investigate the effect of auditing on firm bankruptcy risk. The period of the research is 2011-2021. In the study on BIST Sustainability-25 Index, in the first model, the dependent variable is the market value/book value; the independent variables are Springate S Score, Fulmer H Score, Altman Z Score, Çolakoğlu MFA Score; the ratio of the number of independent auditor members to the total number of members; the number of members in the supervisory board; and the number of early risk detection committee members.
TopIntroduction
Another important purpose of businesses whose main purpose is to make a profit and maximize profit is the continuity of the business. The fact that one of the basic concepts of accounting is the continuity principle reinforces this aim. However, from time to time, businesses may suffer losses due to their distance from corporate governance principles or systematic risks outside themselves. Businesses that make losses for a long time will face the risk of financial failure and bankruptcy. For this reason, measuring the bankruptcy risk of enterprises will contribute to both the early detection of risk and the recovery of businesses from bankruptcy.
The bankruptcy risk of companies is affected by internal factors such as insufficient working capital, deterioration in the financial balance due to excessive borrowing, the inadequacy of internal control, lack of knowledge and experience of management, insufficient sales, etc.; Exchange rate fluctuations, decisions made by policymakers, diplomatic problems between countries, external factors such as import and export regimes, etc. also affect them (Uzun, 2005, p. 159).
For this reason, it is vital for companies to identify and measure risk beforehand. The following methods have been used to identify and measure risk in businesses:
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Altman Z Score
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Zeta model
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Lev (1969) Measuring Balance Sheet Distortion model
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Contingent demands approach (CCA) modern finance theory
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Cash management theory
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Chaos Theory
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Faulty Company Model
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Beaver model
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Springate model
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Ohlson Score model
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Weiber model
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Fulmer model
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CA-Score
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Tamari model
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Meyer and Pifer model
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Wilcox model
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Deakin model
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Edmister model
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Blum model
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Sinkey model
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Taffler and Tisshaw model
When these models are examined, it is seen that each model emerges to develop and differentiate another model from a different perspective. In this study, Altman Z Score, Springate model, and Fulmer model were used, while the Çolak Mfa score, which is not very common in the literature, was also used to determine the risk of bankruptcy.
The Altman Z Score was coined by Altman in 1968. Thanks to this method, which is based on Multiple Discriminant analysis, it eliminates some negative situations such as the fact that companies have the power to analyze all their features simultaneously and the ratios are misclassified and the reliability level is low (Altman, 1968, pp. 591-594).
The Springate model, on the other hand, was applied to industrial enterprises in Canada based on multiple discriminant analyses. In this analysis, 4 different financial ratios were used to distinguish successful/unsuccessful businesses (Rajasekar, Ashraf, & Deo, 2014, p. 103; Haseley, 2012, p. 18). In some studies, it is seen that the results of the model show similar results with Altman.