NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Corporate Liquidity Management: A Conceptual Framework and Survey

Heitor Almeida, Murillo Campello, Igor Cunha, Michael S. Weisbach

NBER Working Paper No. 19502
Issued in October 2013
NBER Program(s):Corporate Finance

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. Yet, while 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.

Much of the variation in the quantity of liquidity can be explained by the precautionary demand for liquidity. While there are alternatives to cash holdings such as hedging or lines of credit, cash remains "king", in that it still is the predominate way in which firms ensure future liquidity for future investments. We discuss theories on the choice of liquidity measures and related empirical evidence. In addition, we discuss agency-based theories of liquidity, the real effects of liquidity choices, and the impact of the 2008-9 Financial Crisis on firms' liquidity management.

download in pdf format
   (1597 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w19502

Published: 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. citation courtesy of

Users who downloaded this paper also downloaded* these:
Farre-Mensa and Ljungqvist w19551 Do Measures of Financial Constraints Measure Financial Constraints?
Horioka and Terada-Hagiwara w19688 Corporate Cash Holding in Asia
Campello, Giambona, Graham, and Harvey w16309 Liquidity Management and Corporate Investment During a Financial Crisis
Back, Li, and Ljungqvist w19669 Liquidity and Governance
Campello, Graham, and Harvey w15552 The Real Effects of Financial Constraints: Evidence from a Financial Crisis
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us