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Accounting Measures of Corporate Liquidity, Leverage, and Costs of Financial Distress

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  • Teresa A. John
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    Abstract

    Liquid assets such as cash and marketable securities constitute a considerable portion of total assets, say 6.3% to 9.6%, of manufacturing firms. Financial managers pay a lot of attention to the measurement and management of corporate liquidity. It has also been recognized that a consequence of severe shortage of liquidity is financial distress. This study analyzes the relationship of the costs of financial distress to the level of corporate liquidity maintained and leverage.

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    Bibliographic Info

    Article provided by Financial Management Association in its journal Financial Management.

    Volume (Year): 22 (1993)
    Issue (Month): 3 (Fall)
    Pages:

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    Handle: RePEc:fma:fmanag:john93

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    Cited by:
    1. Murphy, Austin, 1998. "A possible adverse effect of needing to issue new equity in the future," The Quarterly Review of Economics and Finance, Elsevier, vol. 38(4), pages 899-906.
    2. Woon Gyu Choi & Yungsan Kim, 2001. "Monetary Policy and Corporate Liquid Asset Demand," IMF Working Papers 01/177, International Monetary Fund.
    3. Saddour, Khaoula, . "Why do French firms hold cash ?," Open Access publications from Université Paris-Dauphine urn:hdl:123456789/1207, Université Paris-Dauphine.
    4. Ozkan, Aydin & Ozkan, Neslihan, 2004. "Corporate cash holdings: An empirical investigation of UK companies," Journal of Banking & Finance, Elsevier, vol. 28(9), pages 2103-2134, September.
    5. Heitor Almeida & Murillo Campello & Michael S. Weisbach, 2002. "Corporate Demand for Liquidity," NBER Working Papers 9253, National Bureau of Economic Research, Inc.
    6. Tim Opler & Lee Pinkowitz & Rene Stulz & Rohan Williamson, 1997. "The Determinants and Implications of Corporate Cash Holdings," NBER Working Papers 6234, National Bureau of Economic Research, Inc.
    7. Dewaelheyns, Nico & Locorotondo, Rosy & Van Hulle, Cynthia, 2010. "The determinants of cash holdings within business groups," Open Access publications from Katholieke Universiteit Leuven urn:hdl:123456789/306604, Katholieke Universiteit Leuven.
    8. Dewaelheyns, Nico & Locorotondo, Rosy & Van Hulle, Cynthia, 2011. "Cash holdings within subsidiaries: impact of group health," Open Access publications from Katholieke Universiteit Leuven urn:hdl:123456789/388047, Katholieke Universiteit Leuven.
    9. Shin, Hyun-Han & Kim, Yong H., 2002. "Agency costs and efficiency of business capital investment: evidence from quarterly capital expenditures," Journal of Corporate Finance, Elsevier, vol. 8(2), pages 139-158, March.
    10. Guney, Yilmaz & Ozkan, Aydin & Ozkan, Neslihan, 2007. "International evidence on the non-linear impact of leverage on corporate cash holdings," Journal of Multinational Financial Management, Elsevier, vol. 17(1), pages 45-60, February.
    11. Ang, James & Smedema, Adam, 2011. "Financial flexibility: Do firms prepare for recession?," Journal of Corporate Finance, Elsevier, vol. 17(3), pages 774-787, June.
    12. Alderson, Michael J. & Betker, Brian L., 1995. "Liquidation costs and capital structure," Journal of Financial Economics, Elsevier, vol. 39(1), pages 45-69, September.
    13. D'Mello, Ranjan & Krishnaswami, Sudha & Larkin, Patrick J., 2008. "Determinants of corporate cash holdings: Evidence from spin-offs," Journal of Banking & Finance, Elsevier, vol. 32(7), pages 1209-1220, July.
    14. D'Antoni, Jeremy M. & Mishra, Ashok K. & Chintawar, Sachin, 2009. "Predicting Financial Stress in Young and Beginning Farmers in the United States," 2009 Annual Meeting, January 31-February 3, 2009, Atlanta, Georgia 46861, Southern Agricultural Economics Association.
    15. de Miguel, Alberto & Pindado, Julio, 2001. "Determinants of capital structure: new evidence from Spanish panel data," Journal of Corporate Finance, Elsevier, vol. 7(1), pages 77-99, March.

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