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Jun 16, 2016 · actions used in managing liquidity risk should be regularly stress-tested and evolved as markets, regulation, risk appetites and the business changes. The paper covers liquidity risk management from the perspective of individual firms with a focus on periods of stressed market conditions or idiosyncratic shocks.
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- Is There An "Optimal Level" of Cash?
- Cash Versus Debt Capacity
- Alternative Forms of Liquidity
- The Role of Liquidity When Capital Markets Collapse
There is a general fascination with the level of cash companies carry on their balance sheets. Various figures are discussed in the media, among academics, practitioners, and even in Federal Reserve Board meetings. But this focus on–or search for–the optimal corporate cash level may be misplaced. In practice, the literature's focus on cash has been...
Firms can use external debt to fund their projects even when they face some financial constraints. In these situations, too, cash policy can be quite active, with corporate savings responding to firms' needs to optimize debt policy across time and economic environments. I studied this type of problem in work with Viral Acharya and Almeida.5We look ...
The foregoing work shows that cash creates financial flexibility because it ensures liquidity. Other forms of financing that rely on spot contracting, such as equity issuance and commercial paper borrowing, share the same drawback as reliance on debt capacity: Access may not be there when firms need it most. However, cash is not the only way in whi...
The relation between corporate liquidity and real activity came to the forefront of the academic and policy debate during the global financial crisis. The credit market breakdown started in 2008 and became acute in the spring of 2009. Firms' inability to obtain external funding allowed researchers to look at corporate liquidity management at a time...
Jun 21, 2024 · Efficient liquidity management helps businesses consistently meet financial obligations on time and builds credibility with suppliers, creditors, and other stakeholders. This can lead to better credit terms, more favorable interest rates, and stronger business relationships.
Feb 12, 2024 · The answer is simple — it helps companies meet short-term obligations while positioning for long-term growth and success. In this article, we uncover the essential practices that empower organizations to address liquidity challenges and capitalize on strategic opportunities proactively.
This guidelineA document that describes the steps that financial institutions can take to satisfy their legal obligation to follow sound and prudent management practices and sound commercial practices. sets out the AMF’s expectations regarding liquidity risk management performed by financial institutions.
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.
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Oct 16, 2024 · In this publication, the authors offer an analysis of the liquidity challenges facing sovereign states. They identify three key perspectives: the distinction between liquidity and solvency, the implications of rollover risks, and the financing needs for vital long-term investments.
