Corporate Liquidity Management: A Conceptual Framework and Survey

Posted: 25 Nov 2014

See all articles by Heitor Almeida

Heitor Almeida

University of Illinois at Urbana-Champaign; National Bureau of Economic Research (NBER)

Murillo Campello

Cornell University - Samuel Curtis Johnson Graduate School of Management; National Bureau of Economic Research (NBER)

Igor Cunha

University of Kentucky

Michael S. Weisbach

Ohio State University (OSU) - Department of Finance; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

Multiple version iconThere are 3 versions of this paper

Date Written: December 2014

Abstract

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. However, although 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. 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.

Suggested Citation

Almeida, Heitor and Campello, Murillo and Cunha, Igor and Weisbach, Michael S., Corporate Liquidity Management: A Conceptual Framework and Survey (December 2014). Annual Review of Financial Economics, Vol. 6, pp. 135-162, 2014. Available at SSRN: https://ssrn.com/abstract=2530473 or http://dx.doi.org/10.1146/annurev-financial-110613-034502

Heitor Almeida (Contact Author)

University of Illinois at Urbana-Champaign ( email )

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National Bureau of Economic Research (NBER)

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Murillo Campello

Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )

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Igor Cunha

University of Kentucky ( email )

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Michael S. Weisbach

Ohio State University (OSU) - Department of Finance ( email )

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National Bureau of Economic Research (NBER)

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United States

European Corporate Governance Institute (ECGI) ( email )

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Belgium

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