A Note on Liquidity Risk Management
AbstractWhen a firm is unable to roll over its debt, it may have to seek more expensive sources of financing or even liquidate its assets. This paper provides a normative analysis of minimizing such rollover risk, through the optimal dynamic choice of the maturity structure of debt. The objective of a firm with long-term assets is to maximize the effective maturity of its liabilities across several refinancing cycles, rather than to maximize the maturity of the current bonds outstanding. An advantage of short-term financing is that a firm, while in good financial health, can readjust its maturity structure more quickly in response to changes in its asset value.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 14727.
Date of creation: Feb 2009
Date of revision:
Note: AP CF
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Other versions of this item:
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-02-22 (All new papers)
- NEP-BEC-2009-02-22 (Business Economics)
- NEP-CFN-2009-02-22 (Corporate Finance)
- NEP-RMG-2009-02-22 (Risk Management)
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12939, National Bureau of Economic Research, Inc.
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NBER Working Papers
15653, National Bureau of Economic Research, Inc.
- Ahmed Arif & Ahmed Nauman Anees, 2012. "Liquidity risk and performance of banking system," Journal of Financial Regulation and Compliance, Emerald Group Publishing, vol. 20(2), pages 182-195, May.
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