Legal factors in identifying bankruptcy of capital market companies: two-dimensional approach of hierarchical fuzzy analysis
Authors: Mazaheri Marzieh , Safdarian Leyla , Molaei Mahnam 
Published: December 2024

Purpose

One of the competitive conflicts of the capital market is the structural disruption of companies in terms of company capacity with market changes that can lead to the bankruptcy of companies. Bankruptcy will usually have detrimental social effects and loss of stakeholder rights due to individual negligence and lack of strategic structural insights at the market level; knowing that can prevent financial helplessness and bankruptcy and maintain the ground for growth or maintaining the competitive position of the company in the markets as well as the capital market. The purpose of this research is evaluation of legal factors in identifying bankruptcy of capital market companies by a two-dimensional approach of hierarchical fuzzy analysis.

Design/methodology/approach

In terms of methodology, this research is placed in the category of developmental and mixed methods. In this research, two meta-composite and Delphi analyses were used in the qualitative part to identify the legal factors of corporate bankruptcy, and two-dimensional fuzzy analysis (FIS_2) to determine the most influential dimension identified in this field.

Findings

The results in the qualitative part indicate the existence of 12 confirmed studies and the determination of 8 legal dimensions of corporate bankruptcy, which were identified during two stages of Delphi analysis to confirm the reliability of the components; one dimension was removed from the total of 8 identified dimensions and 7 dimensions were confirmed. Based on the results of the quantitative part, i.e. two-dimensional fuzzy, it was determined that the lack of importance of forensic accounting as one of the pillars of monitoring the financial performance of companies is determined as the most effective legal factor affecting the bankruptcy of companies. In the analysis of the obtained result, it should be stated that, in the shadow of forensic accounting, sufficient evidence and documents are collected during two stages of proceedings and judicial support to determine the financial processes of companies to declare financial violations and provide the necessary documents to determine the type of bankruptcy order. The lack of such a process in terms of mechanisms for evaluating and reviewing the legal factors of companies causes legal issues, and court mechanisms are not created in the implementation processes of companies, especially in the conditions of the country’s capital market, and in this way causes the rights of the stockholders to be violated by the companies.

Originality/value

This is the originality research that evaluates the role of financial legal factors in the bankruptcy of capital market companies. Although it has research importance in terms of the development of theoretical literature and a practical basis in reducing the possibility of fraud and bankruptcy risk, little research has been done to investigate this issue, and conducting this research and expanding it in the forensic accounting functions of capital market companies can help the developers of standards and legislators to have more special supervision over the financial performance of companies from the perspective of developing legal dimensions.