Three Essays On Firm Liquidity Management
type: CreativeWork
description: In Part 1, we study the costs associated with firm illiquidity. We specifically examine the impact of illiquidity on the costs of financing, financial distress, underinvestment, and competitiveness in product markets. We focus on a comprehensive definition of liquidity that expands upon the typical measure of liquidity, cash and marketable securities, commonly used in the management literature. Our liquidity index, derived from existing cash and marketable securities, available credit lines and cash volatility, measures the likelihood that a firm will become illiquid. Lastly, we address the endogeneity issue that plagues corporate literature linking firm performance to other firm attributes using a well-developed dynamic panel generalized method of moments (GMM) estimator. Our results indicate that illiquidity is associated with higher costs of financing, increased financial distress, and decreased competitive advantage. In Part 2, we examine the extent that firms utilize lines of credit to fund cash dividends. We find that higher dividend payouts are related to higher liquidity and dividend paying firms that experience cash shortages with utilize credit lines to continue dividend payments. Our sample statistics indicate that dividend paying firms are considerably different than non-payers. Dividend payers tend to be more liquid, despite having less cash, have smaller credit line balances, higher market capitalizations, less long-term debt, are more profitable, and spend less on capital investments. One of our keying findings indicates that liquidity is an important determinant of dividend payouts. In Part 3, we study the determinants of liquidity for 4,928 micro-firms surveyed by the Kauffman Foundation over the period 2004 – 2012. Female owned firms are more liquid, smaller, carry more inventories, and use less trade credit than male firms. White-owned firms are less liquid than Asian or African-American owned firms, while the Asian-owned are significantly larger …
abstract: In Part 1, we study the costs associated with firm illiquidity. We specifically examine the impact of illiquidity on the costs of financing, financial distress, underinvestment, and competitiveness in product markets. We focus on a comprehensive definition of liquidity that expands upon the typical measure of liquidity, cash and marketable securities, commonly used in the management literature. Our liquidity index, derived from existing cash and marketable securities, available credit lines and cash volatility, measures the likelihood that a firm will become illiquid. Lastly, we address the endogeneity issue that plagues corporate literature linking firm performance to other firm attributes using a well-developed dynamic panel generalized method of moments (GMM) estimator. Our results indicate that illiquidity is associated with higher costs of financing, increased financial distress, and decreased competitive advantage. In Part 2, we examine the extent that firms utilize lines of credit to fund cash dividends. We find that higher dividend payouts are related to higher liquidity and dividend paying firms that experience cash shortages with utilize credit lines to continue dividend payments. Our sample statistics indicate that dividend paying firms are considerably different than non-payers. Dividend payers tend to be more liquid, despite having less cash, have smaller credit line balances, higher market capitalizations, less long-term debt, are more profitable, and spend less on capital investments. One of our keying findings indicates that liquidity is an important determinant of dividend payouts. In Part 3, we study the determinants of liquidity for 4,928 micro-firms surveyed by the Kauffman Foundation over the period 2004 – 2012. Female owned firms are more liquid, smaller, carry more inventories, and use less trade credit than male firms. White-owned firms are less liquid than Asian or African-American owned firms, while the Asian-owned are significantly larger …
author: Lawrey, Chris M.
keywords: Cash, Corporate Finance, Liquidity, Finance
date published: 2015-01-01T08:00:00Z
date modified: 2026-07-24T03:05:43Z
provider: University of Mississippi
publisher: Networked Digital Library of Theses and Dissertations
type: WebPage
source organization: University of Mississippi