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Corporate Liquidity in Games of Monopoly Power

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  • Baskin, Jonathan B
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    Abstract

    Cr oss-sectional variation in corporate liquidity within a sample of large U.S. corporations suggests that there are material effects from product market competiti on. The empirical evidence is consistent with an oligopolistic model wherein liquid assets are employed both to signal commitment to retaliate against market en croachment and to enable firms to rapidly preempt new opportunities. As predicted, firms with high valuation and spending on intangibles, in certain strategic positions, hold large stocks of liquid assets. Copyright 1987 by MIT Press.

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    Bibliographic Info

    Article provided by MIT Press in its journal Review of Economics & Statistics.

    Volume (Year): 69 (1987)
    Issue (Month): 2 (May)
    Pages: 312-19

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    Handle: RePEc:tpr:restat:v:69:y:1987:i:2:p:312-19

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    Web page: http://mitpress.mit.edu/journals/

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    Web: http://mitpress.mit.edu/journal-home.tcl?issn=00346535

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    Cited by:
    1. Heitor Almeida & Murillo Campello & Michael S. Weisbach, 2002. "Corporate Demand for Liquidity," NBER Working Papers 9253, National Bureau of Economic Research, Inc.
    2. Opler, Tim & Pinkowitz, Lee & Stulz, Rene & Williamson, Rohan, 1999. "The determinants and implications of corporate cash holdings," Journal of Financial Economics, Elsevier, vol. 52(1), pages 3-46, April.
    3. Orens, Raf & Reheul, Anne-Mie, 2011. "Do CEO Demographics Explain Cash Holdings in SMEs?," Working Papers 2011/35, Hogeschool-Universiteit Brussel, Faculteit Economie en Management.
    4. Arping, Stefan & Diaw, Khaled M., 2008. "Sunk costs, entry deterrence, and financial constraints," International Journal of Industrial Organization, Elsevier, vol. 26(2), pages 490-501, March.
    5. Iskandar-Datta, Mai E. & Jia, Yonghong, 2012. "Cross-country analysis of secular cash trends," Journal of Banking & Finance, Elsevier, vol. 36(3), pages 898-912.
    6. Anderson, Ronald W. & Hamadi, Malika, 2009. "Large powerful shareholders and cash holding," CEPR Discussion Papers 7291, C.E.P.R. Discussion Papers.
    7. Locorotondo, Rosy & Dewaelheyns, Nico & Van Hulle, Cynthia, 2014. "Cash holdings and business group membership," Journal of Business Research, Elsevier, vol. 67(3), pages 316-323.
    8. Yacine Belghitar & James Khan, 2013. "Governance mechanisms, investment opportunity set and SMEs cash holdings," Small Business Economics, Springer, vol. 40(1), pages 59-72, January.
    9. Ronald W. Anderson & Malika Hamadi, 2009. "Large powerful shareholders and cash holding," LSE Research Online Documents on Economics 24422, London School of Economics and Political Science, LSE Library.
    10. Al-Najjar, Basil, 2013. "The financial determinants of corporate cash holdings: Evidence from some emerging markets," International Business Review, Elsevier, vol. 22(1), pages 77-88.
    11. 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.
    12. Ronald Anderson & Malika Hamadi, 2007. "Ownership, Control and Liquidity," LSF Research Working Paper Series 07-08, Luxembourg School of Finance, University of Luxembourg.
    13. Philippe GAUD & Martin HOESLI & André BENDER, 2004. "Further Evidence on Debt-Equity Choice," FAME Research Paper Series rp114, International Center for Financial Asset Management and Engineering.
    14. Christopher F. Baum & Mustafa Caglayan & Andreas Stephan & Oleksandr Talavera, 2006. "Uncertainty Determinants of Corporate Liquidity," Discussion Papers of DIW Berlin 633, DIW Berlin, German Institute for Economic Research.
    15. 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.
    16. Malika Hamadi & Ronald W. Anderson, 2009. "Large powerful shareholders and cash holding," LSF Research Working Paper Series 09-04, Luxembourg School of Finance, University of Luxembourg.
    17. Rashid Ameer, 2012. "Impact of cash holdings and ownership concentration on firm valuation: Empirical evidence from Australia," Review of Accounting and Finance, Emerald Group Publishing, vol. 11(4), pages 448-467.
    18. Wolfgang Drobetz & Matthias GrĂ¼ninger, 2007. "Corporate cash holdings: Evidence from Switzerland," Financial Markets and Portfolio Management, Springer, vol. 21(3), pages 293-324, September.
    19. Manak Gupta & Alice Lee, 2006. "An Integrated Model of Debt Issuance, Refunding, and Maturity," Review of Quantitative Finance and Accounting, Springer, vol. 26(2), pages 177-199, March.

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