Determinants of corporate liquidity: a literature review
Main Article Content
Abstract
The 2008-9 financial crisis has renewed interest in the way in which firms manage liquidity, because firms’ access to external financing was a major determinant of firms’ survival during this period. Yet, research on determinants of corporate liquidity is an old topic and has been discussed at least since Keynes’ (1936) General Theory. This paper aims to provide the critical point of existing literature related to the determinants of cash holding in order to find directions for further research in this topic.
Article Details
Keywords
Corporate liquidity, Cash holding, Corporate governance
References
1. Almeida, H., Campello, M., Weisbach, M.S. (2002) Corporate Demand for Liquidity. Working Paper, University of Illinois and New York University.
2. Almeida, H., Campello, M., Weisbach, M. (2004) The cash flow sensitivity of cash. Journal of Finance 59 (4), 1777–1804.
3. Antunovich, P. (1996) Optimal slack policy under asymmetric information. Unpublished manu-script. Northwestern University, Evanston, IL.
4. Baum, C.F., Caglayan, M., Ozkan, N., Talavera, O. (2006) The impact of macroeconomic uncertainty on non-financial firms’ demand for liquidity. Review of Financial Economics 15, 289– 304.
5. Baum, Christopher F., Caglayan, M., Stephan, A., Talavera, O. (2008) Uncertainty determinants of corporate liquidity. Economic Modelling 25, 833-849.
6. Boyle, G., Guthrie, G. (2003) Investment, uncertainty, and liquidity. Journal of Finance 58
(5), 2143–2166.
7. Dittmar, A., Mahrt-Smith, J., Servaes, H. (2003) International corporate governance and corporate cash holdings. Journal of Financial and Quantitative Analysis 38, 111-133.
8. Fazzari, S.M., Hubbard, G.R., Petersen, B. (1996) Financing constraints and corporate investment. NBER Working Paper, No. 5462.
9. Ferreira, M.A., Vilela, A.S. (2004) Why Do Firms Hold Cash? Evidence from EMU Countries. European Financial Management 10(2), 295-319.
10. Fresard, L. (2010) Financial Strength and Product Market Behaviour: The Real Effects of Corporate Cash Holdings. Journal of Finance 65(3), 1097-1122.
11. Guney, Y., Ozkan, A. and Ozkan, N. (2006) International Evidence on the Non-linear Impact of Leverage on Corporate Cash Holdings”, Journal of Multinational Financial Management.
12. Harris, M., Raviv, A. (1990) Capital structure and the informational role of debt. Journal of Finance 45, 321–349.
13. Jensen, M.C., Meckling, W.H. (1976) Theory of the firm: Managerial behaviour, agency costs and ownership structure. Journal of Financial Economics 3, 305–360.
14. Jung, K., Kim, Y., Stulz, R. (1996) Timing, investment opportunities, managerial discretion, and the security issue decision. Journal of Financial Economics 42, 159-185.
15. Keynes, J. M. (1936) The General Theory of Employment, Interest and Money. Harcourt Brace, London.
16. Kim, C.-S., Mauer, D.C., Sherman, A.E. (1998) The determinants of corporate liquidity: Theory and evidence. Journal of Financial and Quantitative Analysis 33, 335–359.
17. Modigliani, F., Miller, M. (1958) The cost of capital, corporate finance, and the theory of investment. American Economic Review 48 (3), 261 –297.
18. Myers S.C.,(1984) The capital structure puzzle. Journal of Finance 34(3), 575-592.
19. Myers, S. C. and Majluf, N. (1984) Corporate financing and investment decisions when firms have information that investors do not have. Journal of Financial Economics 13, 187221.
20. Opler, T., Titman, S., (1994) Financial distress and corporate performance. Journal of Finance 49, 1015–1040.
21. Opler, T., Pinkowitz, L., Stulz, R. and Williamson, R. (1999) The determinants and implications of corporate liquidity. Journal of Financial Economics 52, 3-46.
22. Ozkan, A. and Ozkan, N. (2004) Corporate Cash Holdings: An Empirical Investigation of UK Companies. Journal of Banking and Finance 28, 2103-2134.
23. Pinkowitz, L., Williamson, R. (2001) Bank power and cash holdings: Evidence from Japan. Review of Financial Studies 14, 1059–1082.
24. Shyam-Sunder, L., Myers, S.C. (1999) Testing static trade-off against pecking order models of capital structure. Journal of Financial Economics 51, 219–244.
25. Smith, C.W., Watts, R.L. (1992) The investment opportunity set and corporate financing, dividend and compensation policies. Journal of Financial Economics 32, 263-292.
26. Williamson, O. (1988) Corporate finance and corporate governance. Journal of Finance 43, 567–591.
2. Almeida, H., Campello, M., Weisbach, M. (2004) The cash flow sensitivity of cash. Journal of Finance 59 (4), 1777–1804.
3. Antunovich, P. (1996) Optimal slack policy under asymmetric information. Unpublished manu-script. Northwestern University, Evanston, IL.
4. Baum, C.F., Caglayan, M., Ozkan, N., Talavera, O. (2006) The impact of macroeconomic uncertainty on non-financial firms’ demand for liquidity. Review of Financial Economics 15, 289– 304.
5. Baum, Christopher F., Caglayan, M., Stephan, A., Talavera, O. (2008) Uncertainty determinants of corporate liquidity. Economic Modelling 25, 833-849.
6. Boyle, G., Guthrie, G. (2003) Investment, uncertainty, and liquidity. Journal of Finance 58
(5), 2143–2166.
7. Dittmar, A., Mahrt-Smith, J., Servaes, H. (2003) International corporate governance and corporate cash holdings. Journal of Financial and Quantitative Analysis 38, 111-133.
8. Fazzari, S.M., Hubbard, G.R., Petersen, B. (1996) Financing constraints and corporate investment. NBER Working Paper, No. 5462.
9. Ferreira, M.A., Vilela, A.S. (2004) Why Do Firms Hold Cash? Evidence from EMU Countries. European Financial Management 10(2), 295-319.
10. Fresard, L. (2010) Financial Strength and Product Market Behaviour: The Real Effects of Corporate Cash Holdings. Journal of Finance 65(3), 1097-1122.
11. Guney, Y., Ozkan, A. and Ozkan, N. (2006) International Evidence on the Non-linear Impact of Leverage on Corporate Cash Holdings”, Journal of Multinational Financial Management.
12. Harris, M., Raviv, A. (1990) Capital structure and the informational role of debt. Journal of Finance 45, 321–349.
13. Jensen, M.C., Meckling, W.H. (1976) Theory of the firm: Managerial behaviour, agency costs and ownership structure. Journal of Financial Economics 3, 305–360.
14. Jung, K., Kim, Y., Stulz, R. (1996) Timing, investment opportunities, managerial discretion, and the security issue decision. Journal of Financial Economics 42, 159-185.
15. Keynes, J. M. (1936) The General Theory of Employment, Interest and Money. Harcourt Brace, London.
16. Kim, C.-S., Mauer, D.C., Sherman, A.E. (1998) The determinants of corporate liquidity: Theory and evidence. Journal of Financial and Quantitative Analysis 33, 335–359.
17. Modigliani, F., Miller, M. (1958) The cost of capital, corporate finance, and the theory of investment. American Economic Review 48 (3), 261 –297.
18. Myers S.C.,(1984) The capital structure puzzle. Journal of Finance 34(3), 575-592.
19. Myers, S. C. and Majluf, N. (1984) Corporate financing and investment decisions when firms have information that investors do not have. Journal of Financial Economics 13, 187221.
20. Opler, T., Titman, S., (1994) Financial distress and corporate performance. Journal of Finance 49, 1015–1040.
21. Opler, T., Pinkowitz, L., Stulz, R. and Williamson, R. (1999) The determinants and implications of corporate liquidity. Journal of Financial Economics 52, 3-46.
22. Ozkan, A. and Ozkan, N. (2004) Corporate Cash Holdings: An Empirical Investigation of UK Companies. Journal of Banking and Finance 28, 2103-2134.
23. Pinkowitz, L., Williamson, R. (2001) Bank power and cash holdings: Evidence from Japan. Review of Financial Studies 14, 1059–1082.
24. Shyam-Sunder, L., Myers, S.C. (1999) Testing static trade-off against pecking order models of capital structure. Journal of Financial Economics 51, 219–244.
25. Smith, C.W., Watts, R.L. (1992) The investment opportunity set and corporate financing, dividend and compensation policies. Journal of Financial Economics 32, 263-292.
26. Williamson, O. (1988) Corporate finance and corporate governance. Journal of Finance 43, 567–591.