Dynamic corporate liquidity

Détails

ID Serval
serval:BIB_438E0820D72E
Type
Article: article d'un périodique ou d'un magazine.
Collection
Publications
Titre
Dynamic corporate liquidity
Périodique
Journal of Financial Economics
Auteur(s)
Nikolov B., Schmid L., Steri R.
ISSN
0304-405X
Statut éditorial
Publié
Date de publication
04/2019
Peer-reviewed
Oui
Volume
132
Numéro
1
Pages
76-102
Langue
anglais
Résumé
We develop and structurally estimate a dynamic model of corporate liquidity and risk management. When external finance is costly, liquid funds provide corporations with instruments to absorb and react to shocks. Making optimal use of liquid funds means transferring them to times and states where they are most valuable. In the model, firms can transfer liquidity across time using cash and across states drawing on credit lines subject to debt capacity constraints. Optimal liquidity management arises as a trade-off between conditional liquidity with credit lines subject to collateral constraints and uncontingent liquidity using cash. The estimated model explains well the cross-sectional and time series patterns of corporate liquidity management: Small and constrained firms use cash to provide liquidity to fund investment opportunities, and large and unconstrained firms rely on credit lines. While equity issuances are used to replenish cash balances, credit lines fund unanticipated investment opportunities. To solve the model, we develop a novel and efficient approach to dynamic programming relying on linear programming, that is more widely applicable to high-dimensional dynamic models.
Mots-clé
Strategy and Management, Economics and Econometrics, Accounting, Finance
Web of science
Création de la notice
28/10/2016 17:28
Dernière modification de la notice
21/08/2019 6:14
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