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Corporate Liquidity Management: A Conceptual Framework and Survey

Author

Listed:
  • Heitor Almeida

    (College of Business, University of Illinois, Champaign, Illinois 61820)

  • Murillo Campello

    (National Bureau of Economic Research, Cambridge, Massachusetts 02138
    Samuel Curtis Johnson Graduate School of Management, Cornell University, Ithaca, New York 14853)

  • Igor Cunha

    (Nova School of Business and Economics, Lisbon, Portugal 1099-032)

  • Michael S. Weisbach

    (National Bureau of Economic Research, Cambridge, Massachusetts 02138
    Department of Finance, Fisher College of Business, Ohio State University, Columbus, Ohio 43210
    Stockholm Institute for Financial Research, Stockholm, 113 60, Sweden)

Abstract

Ensuring that a firm has sufficient liquidity to finance valuable projects that occur in the future is at the heart of the practice of financial management. However, although discussion of these issues goes back at least to Keynes (1936), a substantial literature on the ways in which firms manage liquidity has developed only recently. We argue that many of the key issues in liquidity management can be understood through the lens of a framework in which firms face financial constraints and wish to ensure efficient investment in the future. We present such a model and use it to survey many of the empirical findings on liquidity management. In addition, we discuss agency-based theories of liquidity, the real effects of liquidity choices, and the impact of the 2008–2009 Financial Crisis on firms’ liquidity management.

Suggested Citation

  • Heitor Almeida & Murillo Campello & Igor Cunha & Michael S. Weisbach, 2014. "Corporate Liquidity Management: A Conceptual Framework and Survey," Annual Review of Financial Economics, Annual Reviews, vol. 6(1), pages 135-162, December.
    • Handle: RePEc:anr:refeco:v:6:y:2014:p:135-162
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    File URL: http://www.annualreviews.org/doi/abs/10.1146/annurev-financial-110613-034502
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    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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