Questioning the validity of the Fleuriet model on empirical grounds

Authors

  • Otávio Ribeiro de Medeiros
  • Fernanda Fernandes Rodrigues

Abstract

The paper reports the result of empirical tests on the validity of the Fleuriet model, also known as Advanced or Dynamic Analysis of Working Capital. According to some authors, the model introduced in Brazil in the 1980´s, brought important innovations to the analysis of working capital. One of the model’s fundamental hypotheses is that current financial assets and liabilities are erratic variables, unrelated to the firms’ operations, in opposition to cyclical or operating assets and liabilities. As a result of the application of statistical methods involving correlation analysis and regression analysis in cross-section and panel data, the study shows that this hypothesis must be rejected, since the tests carried out show that those variables assumed erratic present in fact significant relationship with the firms’ operations. The conclusion is that the Fleuriet model is empirically inconsistent and its validity must be questioned.

Key words: Fleuriet model, working capital, empirical tests.

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Published

2021-05-25

Issue

Vol. 1 No. 2 (2004): sep/dec

Section

Articles

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