The Contexts Genealogy of the Toxic Assets Emergence in Capital Market Companies: The Application of a Paradigmatic Framework

Document Type : Original Article

Authors

1 Ph.D. Candidate, Department of Accounting, Shahrood Branch, Islamic Azad University, Shahrood, Iran

2 Associate Professor, Department of Accounting, Shahrood Branch, Islamic Azad University, Shahroud, Iran

3 Assistant Professor, Department of Accounting, Shahrood Branch, Islamic Azad University, Shahroud, Iran

10.48308/jfmp.2024.105029

Abstract

Purpose: Financial crises have long been associated with the emergence of toxic assets in commercial companies that are significantly active in capital markets. Toxic assets, by definition, are those whose market value is lower than their nominal or recorded value in financial statements due to their lack of trading appeal. These assets are often challenging to evaluate and remain concealed within the complex financial operations of companies. Over time, the accumulation of such assets poses serious risks to capital market companies, exposing them to potential stock price crashes. Given the importance of understanding the underlying causes of toxic asset accumulation, this study aims to investigate the genealogy of the contexts in which toxic assets emerge in capital market companies, utilizing a paradigmatic framework for analysis.
Method: This study employs a multi-step approach, beginning with a series of expert interviews to identify the underlying nature of toxic assets. The questions posed during the interviews were carefully adjusted based on the specific conditions of each session and the insights provided by the participants. This iterative adjustment ensured that the interviews remained focused on the core phenomenon under investigation. A detailed protocol outlining the study's primary themes was developed to guide the interviews, facilitating the extraction of open codes. These open codes were then analyzed and refined based on patterns of repetition and conceptual similarity. The refined codes were transformed into propositional themes, enabling a deeper understanding of the phenomenon under investigation. To apply the paradigmatic framework as a methodological foundation, the study involved empiricists who participated in this analytical process. Subsequently, a focal group was established to evaluate the identified propositions. Using a hierarchical checklist, each statement was systematically categorized into specific types, aligning with the semantic structure of the paradigmatic model. This rigorous approach ensured that the findings were grounded in a structured analytical framework.
Findings: In the qualitative phase, after eliminating redundancies and similar open codes, 51 contextual propositions were identified. These propositions were cross-referenced with related research to validate their relevance and ensure their applicability to the subsequent stages of the study. In the quantitative phase, the paradigmatic framework categorized the 51 contextual propositions into five distinct domains: causal conditions, contextual factors, intervening conditions, strategies, and consequences. This categorization provided a comprehensive view of the factors contributing to the emergence of toxic assets.
Conclusion: The results highlight that toxic asset emergence is influenced by a wide range of factors, from managerial functions to broader economic and structural aspects. While strategies such as information concealment or the positive persuasion of stakeholders’ informational needs may temporarily mitigate the negative effects of toxic assets, their prolonged accumulation often results in a cascade of negative consequences. Companies face increased risks of stock price crashes due to delayed information dissemination and the subsequent surge of negative news. Additionally, delays in selling these assets, even at prices below their nominal value, exacerbate financial losses due to the lack of a suitable trading market. These findings underscore the critical need for proactive strategies to address toxic asset accumulation, thereby minimizing risks and safeguarding financial stability.

Keywords

References

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Financial Management Perspective
Volume 14, Issue 46
2024
Pages 93-131

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