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Illiquidity as a signal

Author

Listed:
  • Jorge, José
  • Kahn, Charles M.

Abstract

We propose a theory of corporate liquidity management in which signaling through illiquidity is cheaper than signaling through “skin in the game.” This causes ex post liquidation of worthy projects even when there are enough aggregate resources available for their continuation.

Suggested Citation

  • Jorge, José & Kahn, Charles M., 2020. "Illiquidity as a signal," Journal of Financial Stability, Elsevier, vol. 50(C).
    • Handle: RePEc:eee:finsta:v:50:y:2020:i:c:s1572308920300723
    DOI: 10.1016/j.jfs.2020.100773
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    References listed on IDEAS

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    More about this item

    Keywords

    Liquidity; Signaling; Economic policy;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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