Management Research in Iran

Abstract Managers are the architects of innovative strategies and leaders of creating company value. This study examines the effect of cost leadership and differentiation strategies on the relation between discretionary and non-discretionary accruals and bankruptcy risk. Variables of discretionary and non-discretionary accruals were measured by the adjusted Jones model, cost leadership strategy with asset turnover, differential strategy with profit margin, and bankruptcy risk was measured using the developed Altman Z method. A systematic screening method was used to select a sample of companies listed on the Tehran Stock Exchange during the years 2014 to 2021. The panel data pattern with fixed effects with the generalized least squares approach has been used to test the research hypotheses. The results showed that discretionary and non-discretionary accruals, cost leadership and differential strategies have a positive and significant relation with bankruptcy risk. The (cost leadership) differential strategy has a positive (negative) and significant effect on the relation between non-discretionary accruals and bankruptcy risk. The effect of differentiation strategy on the relation between discretionary accruals and bankruptcy risk is positive and significant, but the effect of cost leadership strategy on this relation is negative and insignificant. Therefore, with the increase of discretionary accruals, the amount of bankruptcy risk increases. But the cost leadership and differential strategies limits management's discretion and reduces the risk of bankruptcy.