This study investigates the relevance of cash flow information in predicting corporate bankruptcy in Italian private companies. The results indicate that while the cash flow-based model exhibits a high predictive capacity, it is less effective than the accrual-based model. In addition, cash flow-based ratios do not improve the predictive capacity of the accrual-based model. From a theoretical perspective, this study enriches existing literature on the relevance of cash flow information in predicting corporate bankruptcy by extending the investigation to the Italian context, which has not yet been sufficiently studied. From a practical standpoint, it provides Italian companies with new bankruptcy prediction models and offers preliminary suggestions regarding the relevance that should be attributed to cash flow information within the organizational, administrative, and accounting structures that they must establish to promptly detect crises and undertake appropriate initiatives in a timely manner to comply with the requirements of the new legislation on business crises.
Keywords: Corporate bankruptcy prediction, Cash flow statement, Cash flow information, Private companies, Italy
