Cash Flow and Bank Failure Predictions: Evidence From Nigerian Deposit Money Banks


  • Adewumi Zaid Adeyemi Osun State University Okuku Campus, Osun State, NIGERIA
  • Wasiu Adebayo Lamidi Osun State University Okuku Campus, Osun State, NIGERIA
  • Omololu Adex Bamigboye Osun State University Okuku Campus, Osun State, NIGERIA



Cash flow, deposit money banks, bank failure predictions


This study examined the influence of cash flow on bank failure prediction in deposit money banks in Nigeria. The study exploited all listed deposit money banks in the Nigerian stock exchange market that have adequate financial reports for a period of ten years, from 2011 to 2020. Data collected were analyzed using descriptive statistics, correlation matrix, and random effect regression model. The study’s findings of the study divulged that net cash flows from investing and financing activities have a  positive and considerable influence on bank failure predictions while operating activities such as cash flow have an adverse effect on the likelihood of bank distress prediction. It was also observed that investing and financing activities’ net cash flows are significant cash flow components that predict the likelihood of bank failure and the cash flow model is an effective predictor of bank failure in the Nigerian banking sector. The study recommended that the management of Nigeria’s deposit money banks should monitor the banks’ cash flows and continue to sustain or further increase the current net cash flow from investing and financing activities since these cash flow components have a significant impact on their survival.


Download data is not yet available.


Adebayo, A. O., Olorede, T. E., Lamidi, W. A., & Bamigboye, O. A. (2022). Non-Executive Directors and Earnings Quality: Evidence from Nigerian Listed Firms. Management Research Journal,11(1), 38-49.

Adesola, B. S. (2018). Bankruptcy prediction: An investigation of cash flow-basedvalue model, Journal of Management Studies, 8(5), 419-437.

Ahmad, A., Azhar, Z. & Abubakar, W. (2015). Cash flow ratios as predictors of corporate failure, International Journal of Economics of Business, 7(3), 337-349.

Akande, A. A. (2019). Nexus of liquidity management and corporate business failures in non- financialsectors: A case of Nigeria, European Journal of Business and Management Research, 4(5), 66-75.

Al-Najjar, B. (2015). Corporate cash holdings and dividend payments: Evidence from simultaneous analysis, Journal of Managerial and Decision Economics, 32(4), 231-245.

Arlov, O., Rankov, S. & Kotlica, S. (2013). Determinant of corporate financial distress in an emerging market economy: Empirical evidence from Indonesian stock exchange, International ResearchJournal of Finance and Economics, 5(4), 81-93.

Baimwera, B. & Muriuki, A. (2014). Analysis of corporate financial distress determinants: A survey of non financial firms listed in the Nigeria stock exchange, International Journal of Current Business and Social Sciences,1(2), 58-80.

Bello, A.W., Kofarmata, B.A. & Falpla, J.A. (2016). The relevance of financial ratio analysis in predicting business failure in Nigeria: A study of selected companies, Journal of Business and Management, 2(5), 21-28.

Bhandari, S. & Iyer, R. (2013). Predicting business failure using cash flow statement based measures, Journal of Managerial Finance, 39(7), 667-679.

Cantral bank of Nigeria (2016). CBN economic review, 2016.

Danilov, K. (2014). Corporate bankruptcy: Assessment, analysis and prediction of financial Distress insolvency and failure. (Master Thesis), MIT School of Management, USA.

Davies, I. C. (2013). The role of cash flow information in predicting financial distress among Commercial banks in Kenya, (Master Thesis) University of Nairobi, Kenya.

Eragbhe, E. & Aderin, A. (2017). Cash flow deficiency and corporate failure, International Accounting and Taxation Research Group.

Gill, A. & Shah, C. (2012). Determinants of corporate cash holdings: Evidence from Canada, International Journal of Economics and Finance, 4(1), 70-79.

Hasan, Z., & Nita Putri, M. R. (2021). Islamic Banking in Indonesia and Globalization in Era 4.0. Management Research Journal,10(2), 103-111.

Khaliq, A., Altarturi, B., Thaker, H., Harun, M. & Nahar, N. (2014). Identifying financial distress of firms: A case study of Malaysia’s government link companies, International Journal of Economics, Finance and Management, 3(3), 141-150.

Lawal, M. & Ogunleke, J. (2018). Predicting business failure in Nigeria manufacturing firms, Journal of Business and Management 4(3), 66-84.

Limanta, V. N. & Malelak, M. I. (2017). Factors affecting corporate cash holdings of financial sector companies listed in Indonesian stock exchange, Journal of Finance and Quantitative Analysis,6(2), 31-42.

Makinde, T. O. (2016). Bank failure prediction using modified minimum deviation model, International Journal of Finance and Economics, 12(2), 147-159.

Nanayakkara, K.G.& Azeez, A.A. (2016). Predicting corporate financial distress in Sri Lanka: An extension of z-sore model, International Journal of Business and Social Research, 5(3), 41-53.

Nyamboga, T., Omwario, B., Muriuki, A. & Gongera, G. (2014). Determinants of corporate financial distress: Case of non-financial firms listed in the Nairobi stock exchange, Journal of Finance andAccounting, 5(12), 193-207.

Ognjan, A., Sinisa, R. & Slobodan, K. (2014). Cash flow in predicting financial distress and bankruptcy,Advanced in Environmental Science and Energy Planning Journal, 5(2), 13-25.

Onyeiwu, C. & Aliemeke, G. (2014). Financial ratios and the state of health of Nigerian banks, Journal of Finance, 5(3), 47-62.

Ozcan, A. (2020). The use of cash flow statement in predicting business failure: Evidence from an emerging market, Journal of Administrative Sciences, 18(36), 373-387.

Rafique, A. (2018). Effect of financial distress on operating cash flows, International Journal of Management and Applied Science,1(4), 45-59.

Rodgers, C. S. (2013). Predicting corporate bankruptcy using multivariate discriminant analysis, logistic regression and operating cash flow ratio analysis (Ph.D. Thesis) Golden Gate University, San Francisco, USA.

Shamsudin, A. & Kamaluddin, A. (2015). Impending bankruptcy: Examining cash flow pattern of distress and healthy firms, Procedia Economics and Finance, 31(42), 766-774.

Titshabona, N. (2014). Predicting corporate failure: Insights from the financial sector in Zimbabwe, International Journal of Economics, Commerce and Management, 2(11), 21-39.

Uchenna, A. W. & Okelue, U. D. (2012). Predicting corporate failure in the Nigerian manufacturing industry, Journal of Social Sciences, 4(10), 86-93.

Urhoghide, R. O. (2018). Cash flow and corporate failure prediction in Nigeria, Advances in Management Journal, 17(1), 104-117.

Uyar, A. & Kuzey, C. (2014). Determinants of corporate cash holdings: Evidence from the emerging market of Turkey, Journal of Applied Economics, 4(6), 1035-1048.

Wassiuzzaman, S. (2014). Analysis of corporate cash holdings of firms in Malaysia, Journal of Asian Business Studies, 8(2), 118-135.

Wurim, B. (2013). Discriminant analysis and the prediction of corporate bankruptcy in the banking sector of Nigeria, International Journal of Finance and Accounting, 2(6), 319-325.



How to Cite

Adeyemi, A. Z., Lamidi, W. A., & Bamigboye, O. A. (2022). Cash Flow and Bank Failure Predictions: Evidence From Nigerian Deposit Money Banks . Management Research Journal, 11(2), 14–26.

Most read articles by the same author(s)