The role of cash flow information in predicting corporate failure: the state of the literature
Abstract
Provides a comprehensive, critical review of failure prediction with cash flow information since Beaver (1966); and tabulates the methods and cash flow variables used, and the results produced. Describes the literature as “inconsistent and inconclusive” and discusses possible reasons why, e.g. the measurement and diversity of cash flows, lack of model validation, multicollinearity etc. Points out the importance of cash to solvency and dividend payouts; and the limitations it places on creative accounting. Summarizes the reasons for previous inconsistencies and considers possibilities for further research.
Keywords
Citation
Sharma, D.S. (2001), "The role of cash flow information in predicting corporate failure: the state of the literature", Managerial Finance, Vol. 27 No. 4, pp. 3-28. https://doi.org/10.1108/03074350110767114
Publisher
:MCB UP Ltd
Copyright © 2001, MCB UP Limited