The Paradox of Liquidity
The more liquid a firm's assets, the greater their value in a short-notice liquidation. It is generally thought that a firm should find it easier to raise external finance against more liquid assets. This paper focuses on the dark side of liquidity: greater asset liquidity reduces the firm's ability to commit to a specific course of action. As a result, greater asset liquidity can, in some circumstances, reduce the firm's capacity to raise external finance. Firms with "excessively" liquid assets are in the best position to finance illiquid projects. This leads us to a theory of financial intermediation and disintermediation based on the liquidity of assets.
(This abstract was borrowed from another version of this item.)
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
|Date of creation:||Aug 1998|
|Contact details of provider:|| Postal: 725 South Wells Street, Suite 800, Chicago, Illinois 60607-4501|
Web page: http://gsbwww.uchicago.edu/fac/finance/papers/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Shleifer, Andrei & Vishny, Robert W, 1992.
" Liquidation Values and Debt Capacity: A Market Equilibrium Approach,"
Journal of Finance,
American Finance Association, vol. 47(4), pages 1343-1366, September.
- Shleifer, Andrei & Vishny, Robert W., 1992. "Liquidation Values and Debt Capacity: A Market Equilibrium Approach," Scholarly Articles 27692663, Harvard University Department of Economics.
- Diamond, Douglas W & Dybvig, Philip H, 1986. "Banking Theory, Deposit Insurance, and Bank Regulation," The Journal of Business, University of Chicago Press, vol. 59(1), pages 55-68, January.
- Greenbaum, Stuart I. & Thakor, Anjan V., 1987. "Bank funding modes : Securitization versus deposits," Journal of Banking & Finance, Elsevier, vol. 11(3), pages 379-401, September.
- Douglas W. Diamond, 1991. "Debt Maturity Structure and Liquidity Risk," The Quarterly Journal of Economics, Oxford University Press, vol. 106(3), pages 709-737.
- Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
- Takeo Hoshi & Anil Kashyap & David Scharfstein, 1990. "Bank Monitoring and Investment: Evidence from the Changing Structure of Japanese Corporate Banking Relationships," NBER Chapters,in: Asymmetric Information, Corporate Finance, and Investment, pages 105-126 National Bureau of Economic Research, Inc.
- Takeo Hoshi & Anil Kashyap & David Scharfstein, 1989. "Bank Monitoring and Investment: Evidence from the Changing Structure of Japanese Corporate Banking Relationships," NBER Working Papers 3079, National Bureau of Economic Research, Inc.
- Douglas W. Diamond & Philip H. Dybvig, 2000. "Bank runs, deposit insurance, and liquidity," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 14-23.
- Diamond, Douglas W & Dybvig, Philip H, 1983. "Bank Runs, Deposit Insurance, and Liquidity," Journal of Political Economy, University of Chicago Press, vol. 91(3), pages 401-419, June.
- Boyd, John H. & Prescott, Edward C., 1986. "Financial intermediary-coalitions," Journal of Economic Theory, Elsevier, vol. 38(2), pages 211-232, April.
- John H. Boyd & Edward C. Prescott, 1985. "Financial intermediary-coalitions," Staff Report 87, Federal Reserve Bank of Minneapolis.
- Takeo Hoshi & Anil K. Kashyap & David Scharfstein, 1989. "Bank monitoring and investment: evidence from the changing structure of Japanese corporate banking relations," Finance and Economics Discussion Series 86, Board of Governors of the Federal Reserve System (U.S.).
- Calomiris, Charles W & Kahn, Charles M, 1991. "The Role of Demandable Debt in Structuring Optimal Banking Arrangements," American Economic Review, American Economic Association, vol. 81(3), pages 497-513, June.
- Ram T. S. Ramakrishnan & Anjan V. Thakor, 1984. "Information Reliability and a Theory of Financial Intermediation," Review of Economic Studies, Oxford University Press, vol. 51(3), pages 415-432.
- Fama, Eugene F., 1985. "What's different about banks?," Journal of Monetary Economics, Elsevier, vol. 15(1), pages 29-39, January.
- Douglas W. Diamond, 1984. "Financial Intermediation and Delegated Monitoring," Review of Economic Studies, Oxford University Press, vol. 51(3), pages 393-414.
- Oliver Hart & John Moore, 1994. "A Theory of Debt Based on the Inalienability of Human Capital," The Quarterly Journal of Economics, Oxford University Press, vol. 109(4), pages 841-879.
- Huberman, Gur, 1984. " External Financing and Liquidity," Journal of Finance, American Finance Association, vol. 39(3), pages 895-908, July.
- Flannery, Mark J, 1994. "Debt Maturity and the Deadweight Cost of Leverage: Optimally Financing Banking Firms," American Economic Review, American Economic Association, vol. 84(1), pages 320-331, March.
- Mark J. Flannery, 1991. "Debt maturity and the deadweight cost of leverage: optimally financing banking firms," Proceedings, Federal Reserve Bank of San Francisco, issue Nov.
- Myers, Stewart C., 1977. "Determinants of corporate borrowing," Journal of Financial Economics, Elsevier, vol. 5(2), pages 147-175, November. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:wop:chispw:339. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Thomas Krichel)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.