Document Type : Research Paper

Authors

Abstract

In this research, the Market efficiency related to going concern entity and its Probability reflect on the price/earnings ratio (P/E) was tested that whether, when going concern entity evaluated above later it's PIE become near to industry's P/E and vice versa? In this research, one of the bankruptcy production models wdll- known as zargin Model is used for sorting and ranging the entities on the base of going concern, which its output data is limited on zero and one, indicates the probability of the bankruptcy and going concern of the entity. In the use of this model, since the model was prepared on the entities' activity environment and its structure in the other countries and it wasn't consistent for Iranian corporation's activity environment, so after selection of the sample consisted of 40 corporations in the SEC, its coefficients are corrected and constituted with Iranian corporation's qualitative and in the along of doing research at first , the efficiency of the model was tested with the  sample consisted  of  14 normal and   bankrupt   and   going   concern   probabilities   for  the sample corporations of the car industry was computed. Also as regards the evaluating high and low of the P/E ratio was problem, the amount of farness and nearness of the entity's P/E to industry’s P/E are adopted and computed as favorable parameter. Then the existence of meaningful correlation relationship between computed going concern relatively ability and amount of contradiction of entity's P/E than industry's P/E was tested. The results of study showed  that  there  isn't  any   meaningful   relationship between these two parameters in the  level  of  supportable error of 5 percent   and  we cannot use the  evaluating of differences between entity's PIE to find out  the  amount their going concern ability in the future.