TY  - JOUR
AU  - Myers,Stewart C.
AU  - Rajan,Raghuram G.
TI  - The Paradox of Liquidity
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 5143
PY  - 1995
Y2  - June 1995
UR  - http://www.nber.org/papers/w5143
L1  - http://www.nber.org/papers/w5143.pdf
N1  - Author contact info:
Stewart C. Myers
Massachusetts Institute of Technology
Sloan School of Management
E62-620
77 Massachusetts Avenue
Cambridge, MA 02142
Tel: 617/253-6696
Fax: 617/258-6855
E-Mail: scmyers@mit.edu

Raghuram Rajan
Booth School of Business
University of Chicago
5807 South Woodlawn Avenue
Chicago, IL 60637
Tel: 773/702-4437
Fax: 773/702-0458
E-Mail: raghuram.rajan@ChicagoBooth.edu
AB  - The more liquid a company's assets, the greater their value in a short-notice liquidation.  Liquid assets are generally viewed as increasing debt capacity, other things being equal.  This paper focusses on the dark side of liquidity: greater liquidity reduces the ability of borrowers to commit to a specific course of action.  It examines the effects of differences in asset liquidity on debt capacity.  It suggests an alternative theory of financial intermediation and disintermediation.
ER  -