Original Research Article | OPEN ACCESS

E Eragbhe, PhD , A Aderin

Department of Accounting, University of Benin, Benin City, Edo State, Nigeria.;

For correspondence:-  E Eragbhe, PhD   Email: emmanuel.eragbhe@uniben.edu   Tel:+2348023288340

Received: 10 Oct 2017        Accepted: 21 Dec 2017        Published: 31 Dec 2017

Citation: Eragbhe, PhD E, Aderin A. CASH FLOW DEFICIENCY AND CORPORATE FAILURE: EVIDENCE FROM NIGERIA. Account Tax Rev 2017; 1(1):38-54 doi:

© 2017 The authors.
This is an Open Access article that uses a funding model which does not charge readers or their institutions for access and distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0) and the Budapest Open Access Initiative (http://www.budapestopenaccessinitiative.org/read), which permit unrestricted use, distribution, and reproduction in any medium, provided the original work is properly credited..


This study investigates the ability of cash flow deficiency to predict bankruptcy possibilities. The study utilised a sample of 50 quoted companies in Nigeria drawn from different sectors that have consistently published their audited annual financial report between 2012 and 2014. We adopt a pooled data regression analysis in analysing the data for the study. The results show that cash flow deficiency predicts bankruptcy possibilities. Firm age, leverage and profitability were also found to impact bankruptcy possibilities significantly. The result further reveals that investment redemption can be a survival strategy as positive cash flow from investing also predicts the chances of firm survival. The study recommends that companies must ensure positive and consistent cash flow that would be sufficient to support daily needs and also to consistently meet business expectations and survive in the long-run.

JEL Classification: M41. 

Keywords: Cash flows, Deficiency, Bankruptcy Prediction, Corporate Failure.

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