Original Research Article | OPEN ACCESS

CASH FLOW DEFICIENCY AND CORPORATE FAILURE: EVIDENCE FROM NIGERIA

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

Citation: CASH FLOW DEFICIENCY AND CORPORATE FAILURE: EVIDENCE FROM NIGERIA. Account Tax Rev 2002; 1(1):38-54 doi:

© 2002 The authors.
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Abstract

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.