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An Econometric Model of a Firm’s Financial Statements

Author

Listed:
  • Otavio De Medeiros

    (Universidade de Brasilia, Brazil)

Abstract

This paper reports the construction and testing of an econometric model designed to represent a firm’s financial statements. More specifically, the paper aims at showing how a firm’s financial statements can be empirically explained by means of a simultaneous equations structural model connecting macro and microeconomic (market) variables with accounting variables. We also present forecasts for the financial statements. The firm to which the model is applied is a monopoly in the Brazilian domestic market for petroleum products and the largest Brazilian firm in operation. The results obtained are consistent with the expectations associated to the structural model. Applications stemming from the study include financial analysis, forecasting and planning, as well as firm valuation.

Suggested Citation

  • Otavio De Medeiros, 2005. "An Econometric Model of a Firm’s Financial Statements," Finance 0503020, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpfi:0503020
    Note: Type of Document - pdf; pages: 10
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    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/fin/papers/0503/0503020.pdf
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    References listed on IDEAS

    as
    1. Stowe, John D & Watson, Collin J & Robertson, Terry D, 1980. "Relationships between the Two Sides of the Balance Sheet: A Canonical Correlation Analysis," Journal of Finance, American Finance Association, vol. 35(4), pages 973-980, September.
    2. Franklin M. Fisher & Paul H. Cootner & Martin N. Baily, 1972. "An Econometric Model of the World Copper Industry," Bell Journal of Economics, The RAND Corporation, vol. 3(2), pages 568-609, Autumn.
    3. Marsh, Paul, 1982. "The Choice between Equity and Debt: An Empirical Study," Journal of Finance, American Finance Association, vol. 37(1), pages 121-144, March.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Otavio Ribeiro de Medeiros & Bernardus Ferdinandus Nazar Van Doornik & Gustavo Rezende de Oliveira, 2011. "Modeling and forecasting a firm’s financial statements with a VAR – VECM model," Brazilian Business Review, Fucape Business School, vol. 8(3), pages 20-39, July.

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    More about this item

    Keywords

    econometric model; accounting; financial statements; Brazilian firm; simultaneous equations;
    All these keywords.

    JEL classification:

    • G - Financial Economics

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