IDEAS home Printed from https://ideas.repec.org/a/bla/jbfnac/v25y1998i7-8p1005-1023.html
   My bibliography  Save this article

Earnings Retention as a Specification Mechanism in Logistic Bankruptcy Models: A Test of the Free Cash Flow Theory

Author

Listed:
  • Rahul Dhumale

Abstract

This paper explores the applicability of as a specification mechanism to improve forecasting methods in corporate bankruptcy. The study combines lessons from Jensen's Free Cash Flow Theory with a logisitic model of bankruptcy to improve forecasting accuracy. The model uses data from the Indian textile industry to show that data classification based on investment opportunities is yet another way of improving precision. The study also re‐examines the Free Cash Flow Theory and concludes that in applying it to a bankruptcy scenario, its initial findings regarding retention policy hold true; that is, low growth firms should retain less of their earnings than their high growth counterparts.

Suggested Citation

  • Rahul Dhumale, 1998. "Earnings Retention as a Specification Mechanism in Logistic Bankruptcy Models: A Test of the Free Cash Flow Theory," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 25(7‐8), pages 1005-1023, September.
    • Handle: RePEc:bla:jbfnac:v:25:y:1998:i:7-8:p:1005-1023
    DOI: 10.1111/1468-5957.00223
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/1468-5957.00223
    Download Restriction: no
    File URL: https://libkey.io/10.1111/1468-5957.00223?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:jbfnac:v:25:y:1998:i:7-8:p:1005-1023. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=0306-686X .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.